Looking forward to March USDA report
By: Ray Grabanski, Agweek
Wheat: gains limited by higher dollar
The wheat markets had little net change last week. The Chicago market slipped lower with increased moisture and a late week sell-off in the corn market, while the Minneapolis and Kansas City markets held steady.
Strong gains in the U.S. dollar sparked a risk-off day in most commodities on March 18, and wheat was no exception. Losses of more than 10 cents were recorded during the day, but the market did not take out last week’s lows, so chart damage was avoided.
Wheat became the leader of the grain markets on March 19. The March 18 crop reports showed a slight improvement in the condition of the winter wheat crop in Kansas and Oklahoma, and a slight decrease in Texas, but the market paid little attention to a crop report this early in the spring season. Month to month spreads in the wheat markets are growing more bullish by the day, with inversions now in place in old-crop markets. Commercial buying was supplemented by noncommercial buying on March 20, as the turn lower by the dollar index brought spec money back into wheat. Traders were also concerned about cold weather in parts of the winter wheat production areas.
Wheat came under steady selling pressure March 21, with extended forecasts calling for more moisture in the winter wheat production regions. Export sales were decent, but shipments remain behind pace. Losses continued on March 22 with selling pressure across the grain markets. The winter wheat cash markets are trading at a discount to corn, which should continue to draw wheat into domestic feed and ethanol uses.
The U.S. Department of Agriculture’s export inspections for wheat was estimated at 23.9 million bushels for the week ending March 15, with the year-to-date pace at 746 million bushels compared with 796.7 million bushels for last year at this time. With 11 weeks left in the marketing year, shipments need to average 25.3 million bushels to make the revised USDA expectations of 1.025 billion bushels. USDA reported export sales of 17.8 million bushels, above the 11.2 million bushels needed to keep pace with projections. Shipments of 23.4 million bushels were below the 28 million bushels needed.
Corn: strong cash market
The corn market was up 8 cents in the May contract last week, as of noon on March 22. Corn had a positive close in the first four days of last week, but did come under pressure on March 22 with profit taking. Buying interest resurfaced last week with the strength in the cash market. New-crop contracts found support from what appears could be a late spring. Traders are looking ahead to this week’s USDA reports.
The corn market started lower on March 18 with Euro zone financial market fears, which strengthened the dollar and pressured the stock market. From there the futures firmed into the afternoon and traded with strength through March 21. Active bull spreading with old- versus new-crop contracts supported the front months. Talk of more idled ethanol plants coming back on line helped to create buying interest. Additional support comes from the tight stocks and a strong basis, with spots in Illinois and Iowa at a plus 30 to 43 cents. The May contract also posted a high not seen since the first part of February.
The new crop months found support from the cool and wet weather in the eastern Corn Belt that may delay planting and also limit the availability of early harvested corn. There is talk of corn acres being switched to soybeans. Also, parts of Argentina and the Western U.S. remain dry and that could hurt production.
Ethanol production for the week ending March 15 averaged 809,000 barrels per day, down 9.4 percent versus last year. Corn used in production was estimated at 84.95 million bushels and needs to average 88.06 million bushels per week to meet this crop year’s USDA estimate of 4.5 billion bushels. Stocks as of March 15 were 18.47 million barrels, which is down 1.2 percent versus the previous week and down 18.7 percent versus last year.
USDA’s export inspections report was bearish for corn at 15.4 million bushels, with 17.6 million bushels needed to keep pace with USDA projections. The export sales report for corn was at 3.6 million bushels, below the 9.7 million bushels needed to meet USDA’s projection of 825 million bushels.
Total shipments last week were at 16.5 million bushels, below the 17.4 million bushels needed for the 2012 to ’13 marketing year.
Soybeans: watching the weather
As of noon on March 22, May soybeans were up 14 cents on the week while November 2013 soybeans were unchanged. The market continues to focus on the South American harvest, with some attention now being paid to spring weather forecasts in the U.S.
Slowing export demand led to lower closes to start last week, with March 19 being the sixth consecutive session to close with losses. The South American harvest pressured the market. Soft outside markets were a factor as well, with the U.S. dollar higher on March 18 and 19.
May soybeans closed higher for the first time in more than a week on March 20 with support from commercial buying. Speculative buying in the July to November spread provided additional support, as did some light short covering. Logistical problems continue in Brazilian ports with questions developing over Chinese demand after reports of Brazilian cargo cancellations. May soybeans overcame a lackluster export sales report to close sharply higher March 21. The strengthening inverse in the May-to-July futures spread indicated commercial buying that had been sparked by the March 20 reversal.
Losses returned on March 22 with a negative tone across the grain markets. Speculative traders were taking profits to end last week, and there was also positioning ahead of the March 29 USDA reports.
USDA reported soybean export inspections pace as of the week ending March 15 at 8.9 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.174 billion bushels compared with 958.8 million bushels for last year at this time. The soybean export sales pace for the week ending March 15 was estimated at 12.6 million bushels (4 million bushels for 2012 to ’13), bringing this year’s total to 1.308 billion bushels, compared with 1.133 billion bushels last year at this time. Shipments were reported at 8.3 million bushels.
USDA reported export inspections of 88,000 bushels of barley last week. Year-to-date export inspections for barley stand at 6.15 million bushels compared with 6.02 million bushels last year. USDA reported no export sales or shipments for barley. Cash feed barley bids in Minneapolis on March 21 were at $5.25 per bushel.
USDA reported export inspections of 450,000 bushels of durum last week. USDA reported export sales of 200,000 bushels of durum last week, with shipments of 500,000 bushels. Year-to-date sales are at 17.1 million bushels, up from 16.3 million bushels at this time last year. Cash bids for milling quality durum on March 21 were at $7.75 per bushel in Berthold, N.D., and $7.85 in Dickinson, N.D.
Canola futures on the Winnipeg, Manitoba, exchange had gains of up to $12 (Canadian) per ton last week. The new-crop November contract had the larger gains, with support coming from acreage competition for 2013. The old-crop May contract had smaller gains of around $7 (Canadian) per ton last week with choppy trade in the soybean market. Support did come from lower trade in the Canadian dollar and gains in global oilseed markets. Cash canola bids in Velva, N.D., were at $27.76 per hundredweight on March 21.
USDA reported export sales of 19.6 trillion metric tons of soybean oil, with shipments of 11.7 trillion metric tons. Total sales so far this year are at 815 trillion metric tons, way up from 331.3 trillion metric tons last year. Cash bids for NuSun sunflowers in Fargo, N.D., were at $22.60 per hundredweight on March 21.
Market activity remains quiet, with old-crop bids in the $30 to $32 per hundredweight range for pintos and $30 for navies. Offerings of $33 new-crop contracts for pintos and navies are getting some attention, but acres have been limited, and those prices do not compete well with soybeans for most producers.