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Published January 21, 2013, 11:04 AM

Demand drives grain markets higher

The wheat markets had gains of 25 to 28 cents last week.

By: Ray Grabanski, Agweek

Wheat: fewer acres and improving demand

The wheat markets had gains of 25 to 28 cents last week. The Jan. 11 U.S. Department of Agriculture report renewed some optimism in the fundamental picture for the wheat market, which has now gained back about a third of last month’s losses.

To start the week on Jan. 14, wheat markets had decent gains, with most of the gains coming in the winter wheat exchanges. Early support continued to spill over from the Jan. 11 friendly USDA annual crop production report, which cut wheat stocks. Additional support came from a lower-than-expected winter wheat seeded acreage estimate. The fundamental picture continues to improve for wheat, with tighter stocks, fewer acres and the crop going into dormancy in poor shape. An improving fundamental picture in wheat has helped convince short position holders to start liquidating positions.

The Jan. 15 gains marked the third straight higher session, which pushed wheat to three-week highs. A better-than-expected feed demand estimate, combined with weather concerns in both Russia and China, has helped push wheat. Extremely cold temperatures in much of Russia and the U.S. winter wheat region has many traders thinking production estimates for those areas likely will decline. Technical buying also has helped push the market, as wheat lost more than $1 in the month of December and for the first week of January 2013.

Wheat struggled to start the session Jan. 16, as technical selling took the lead. Late in the session, the strength from the soybean complex was enough to help push wheat to the plus side. Wheat traded on both sides of unchanged Jan. 17 before settling with single-digit losses. The Kansas City market had the larger losses because of some weather premium being taken back out of that market. Wheat markets had strong gains in the past week, and were due for a quieter day. Quiet trade continued on Jan. 18, with mostly light losses to finish the week.

USDA reported wheat export inspections pace for the week ending Jan. 11 at 10.6 million bushels. This brings the year-to-date export inspections pace to 539.4 million bushels, compared with 621 million at this time last year. With 20 weeks left in wheat’s marketing year, shipments need to average 25.5 million bushels to make USDA’s projection of 1.05 billion bushels. Wheat export sales pace for the week ending Jan. 11 was estimated at 19.7 million bushels. This brings the year-to-date export sales pace for wheat to 729.2 million bushels, compared with 754.8 million for last year. With 20 weeks left in wheat’s marketing year, sales need to average 16.2 million bushels to make USDA’s projection of 1.05 billion.

Corn: tight stocks support cash corn

The corn market was up 15 cents in the March contract for last week, as of Jan. 18 morning trade. Corn found follow-through buying from the Jan. 11 USDA report to start the week. A lower stocks number was a surprise and brought money back into the market. The futures came under some pressure later in the week, with poor export reports and a disappointing ethanol report.

The corn market traded with strength on Jan. 14 and 15, with follow-through buying from the Jan. 11 friendly report. A large increase in feed use was a surprise and the net result was a tighter ending stocks number of 602 million bushels. Export demand has been sluggish and USDA did lower its estimates, while the export inspections were poor on Jan. 14 at 9.2 million bushels. Corn shipments needed each week are now 20.3 million bushels. The cumulative shipment pace is now 29 percent of the USDA export estimate versus the five-year average of 34 percent, and are 55 percent below levels of one year ago. A dryer 10-day forecast for northern Argentina and southern Brazil offers support, but it is early in the growing season and we have to see if it materializes.

Corn closed slightly lower on Jan. 16 and 17. The futures had closed higher for the past seven sessions and profit taking came into play. We are also at the high end of the trading range and buying interest has slowed at these levels. News that Taiwan bought 60,000 metric tons of corn from Argentina added weakness and proves that U.S. corn is overpriced compared with competition. The disappointing ethanol report and lack of any export demand also added pressure. The 82.3 million bushels of corn used for ethanol the week ending Jan. 11 was the lowest amount for this marketing year. Argentina’s Ministry of Agriculture reported that it expects the 2012 to ’13 corn crop to produce 28 million to 30 million metric tons, up from its prior estimate of 24.5 million.

Ethanol production for the week ending Jan. 11 averaged 784,000 barrels per day, down 5 percent versus the previous week and down 16.7 percent versus last year. Total ethanol production for the week was 5.5 million barrels. Corn used in production the week ending Jan. 11 is estimated at 82.3 million bushels and the lowest weekly usage for the 2012 to ’13 marketing year. Corn use needs to average 86.8 million bushels per week to meet this crop year’s USDA estimate of 4.5 billion bushels. This crop year’s cumulative corn used for ethanol production is 1.6 billion bushels. Stocks as of Jan. 11 were 20.4 million barrels, up 2.6 percent from the previous week and up 4.2 percent versus last year.

USDA’s export inspections report was bearish for corn. There were 9.2 million bushels of corn reported shipped, well below the 20.2 million needed to meet USDA’s projection of 950 million for the 2012 to ’13 marketing year. This was at the low end of the pre-report estimates of 8 million to 15 million bushels. The export sales report for corn was at 15.5 million bushels, above the 13.2 million needed to meet USDA’s projection of 950 million bushels. This was within the estimates of 9.8 million to 18.7 million bushels and neutral for corn. Total shipments last week were at 9.7 million bushels, below the 20.2 million needed for the 2012 to ’13 marketing year.

Soybeans: strong demand leads to gains

As of the Jan. 17 close, March soybeans were up 57 cents on the week, while November 2013 soybeans were 19 cents higher. South American weather continues to have a strong impact on the market.

Strong buying from commercial and noncommercial traders on Jan. 14 led to a sharply higher close to begin the week for soybeans. The weather forecast has been good for South America, but it is a bit drier going forward for southern Brazil and parts of Argentina. National Oilseed Processers Association crush numbers released Jan. 14 were supportive at 159.9 million bushels. Demand remains strong, with USDA announcing a sale of 120,000 metric tons of soybeans to China. The Jan. 14 export inspections came in well above the amount needed to keep pace with USDA’s projection.

Strong commercial buying had soybeans trading higher early Jan. 15, but profit taking and hesitant noncommercial traders led to the market slipping to close with small losses. Soybeans were higher Jan. 16, as commercial and noncommercial traders provided support. Demand remains strong for soybeans and traders believe China secured additional cargoes last week.

Soybeans traded higher early Jan. 17 on a strong export sales report before slipping lower into midday, as the export sales were likely already priced in. Around midday, Agroconsult, a Brazilian private forecaster, released a production projection of 84 million metric tons, compared with USDA’s Jan. 11 World Agriculture Supply and Demand Estimates report at 82.5 million metric tons. Commercial buying continues in light of strong international demand, including a sale of 240,000 metric tons to undisclosed destinations announced by USDA. Jan. 17 export sales were well above the amount needed to keep pace with USDA’s projection.

USDA reported soybean export inspections pace for the week ending Jan. 11 at 39.1 million bushels. This brings the year-to-date export shipments pace for soybeans to 855.9 million bushels, compared with 640.2 million for last year at this time. Soybean export sales pace for the week ending Jan. 11 was estimated at 59.1 million bushels, bringing this year’s total to 1,201.5 million, compared with 938.5 million last year at this time.

Barley

USDA reported barley’s export inspections pace for the week ending Jan. 11 at 8,000 bushels. USDA reported export sales of 1,500 metric tons of barley, going to Taiwan and South Korea. Jan. 17 cash barley bids in Minneapolis had feed barley at $5.15 per bushel, while malting barley bids were at $7.05.

Durum

USDA reported no durum export inspections for the week ending Jan. 11. There were no new export sales either, with the year-to-date export sales pace at 15.6 million bushels, compared with 14.9 million for last year. Jan. 17 cash bids for milling quality durum were at $8 per bushel in Berthold, N.D., and $7.95 in Dickinson, N.D.

Canola

Canola futures on the Winnipeg, Manitoba, exchange had net gains of up to $16 (Canadian) per ton last week. Gains in the soybean market provided support to canola, as demand for oilseeds remains strong. Additional support continued to spill over from the Jan. 11 friendly crop production report, as well as from weather concerns in South America. Fundamentally, canola should be able to outperform the other vegetable oil products as a result of a lower-than-expected production estimate. Cash canola bids in Velva, N.D., were at $27.81 per hundredweight on Jan. 17.

Sunflowers

Soybean oil export sales pace for the week ending Jan. 11 was estimated at 12.9 trillion metric tons. This brings the year-to-date total to 686.9 trillion metric tons, compared with last year’s 190.1 trillion. Cash sunflower bids in Fargo, N.D., were at $22.40 per hundredweight on Jan. 17.

Dry beans

The USDA report reaffirmed the large crop that was produced in the 2012 crop year. USDA is reporting bids of $30 to $32 per hundredweight for navies and blacks and $32 to $34 for pintos in North Dakota and Minnesota.

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