Weather premium returningThe Department of Agriculture's April Crop Production report disappoints.
By: Ray Grabanski, Agweek
Wheat: wet, cold weather support
Wheat started last week off on strong ground, but started to lose some of its bullishness by midweek, only to find new found strength late in the week. To start the week, production concerns helped to push wheat higher while the U.S. Department of Agriculture’s April Crop Production report took that enthusiasm away. Late week strength again focused on production issues. For the week ending April 11, May Minneapolis gained 2 cents, May Chicago dropped 2.5 cents, and May Kansas City rallied 12.75 cents.
Wheat started last week with small gains early. Early support came from reports China had purchased 14 to 16 cargos of wheat the previous week. This rumor was floating around the trade, but last week it was confirmed. Late in the session, wheat rallied as traders tried to price in a little weather premium. Cold, wet forecasts for this week and the next continue to create concern toward 2013 production potential.
The April 9 session had wheat trading a little sloppy with early selling tied to the April 8 crop progress report (showed a slight improvement in the U.S. winter wheat crop). Losses were limited by weather forecasts that are calling for another round of freezing temperatures for the Southern Plains. Additional support was the result of position squaring ahead of the April 10 USDA crop production report.
Report day had wheat starting with little fanfare as traders were not willing to commit to either side ahead of USDA’s April crop production report. In its April supply and demand report, USDA increased wheat ending stocks 15 million bushels to 731 million bushels, which was as expected. The adjustments USDA made: seed demand increased 1 million bushels and feed and residual demand decreased 15 million bushels. USDA left wheat’s national average price unchanged at $7.80 per bushel. On the world front, USDA continued the negative tone showing world stocks at 182.26 million metric tons, compared with expectations of 178.6 million metric tons.
Late in the session losses were trimmed as attentions turned from the USDA report to weather. Freezing temperatures were reported for much of the winter wheat region with temperatures dropping into the teens as far south as Texas. This will trim the potential size of the wheat crop.
To wrap up the week, wheat opened lower with selling pressure coming from a disappointing export sales estimate. Additional selling spilled over from the USDA April crop production report. Late in the session, wheat was able to rally as traders started to work a weather premium back into wheat. Wheat needs to have a weather premium as cold, wet conditions delay planting of spring wheat and freezing temperatures threaten the Southern Plains.
The export sales pace for the week ending April 5 was estimated at a combined total of 12.5 million bushels with 9.7 million bushels old crop and 2.8 million bushels new crop. With nine weeks left in the marketing year, shipments need to average 22.8 million bushels and sales need to average 8.9 million bushels to make USDA’s expectations of 1.025 billion bushels.
Corn: USDA report and weather
Corn firmed up last week with smaller-than-expected domestic stocks in the USDA monthly report. The weather is also taking part in more conversations and does not look promising for planting for the next two weeks. The weather will be the driver as we move forward. For the week ending April 11, corn gained 22 cents in the May contract.
Corn traded with decent gains on April 8 and 9 and ahead of the April 10 USDA report. The futures found support from the wet and cold weather that continues to delay planting.
There was also spread trading with old versus new crop corn and corn versus wheat that pushed the front months. Additional strength came from talk that China was showing some interest in purchasing U.S. corn.
The monthly USDA supply and demand report was released April 10 and the futures traded slightly higher into the close. The report showed smaller-than-expected U.S. stocks, but larger-than-estimated world supplies. The U.S. ending stocks for 2012 to ’13 came in at 757 million bushels up from 632 million bushels last month, but below the trade estimate of 812 million bushels. Feed usage was lowered by 150 million bushels and export demand was cut by 25 million bushels, while ethanol use was increased by 50 million bushels. World ending stocks came in at 125.29 million metric tons versus 117.48 million metric tons last month and above trade estimates of 119.1 million metric tons.
The corn market traded slightly higher on April 11 with smaller than expected ending stocks and a better than expected ethanol report. Ethanol showed the highest daily production since July 2012 and stocks dropped to their lowest level in four weeks. Although, buying interest was limited with a disappointing export sales report.
Ethanol production for the week ending April 5 showed production averaged 854,000 barrels per day and down 4.7 percent versus last year. Corn used in last week’s production is estimated at 89.67 million bushels and needs to average 88.3 million bushels per week to meet this crop year’s USDA estimate of 4.5 billion bushels. Stocks as of April 5 were 17.79 million barrels and down 18.30 percent versus last year.
USDA’s export inspections report was bearish, with corn reporting only 10.1 million bushels shipped. Shipments needed each week to hit the USDA export estimate are 17.9 million bushels. The export sales report for corn was at 7.3 million bushels, below the 8.6 million bushels needed to meet USDA’s projection of 800 million bushels. Total shipments were at 11 million bushels and below the 16.3 million bushels needed for the 2012 to ’13 marketing year.
Soybeans: strong exports continue
Old crop soybeans traded with decent strength last week as tight supply concerns started to resurface. New crop contracts struggled as weather forecasts are hinting of planting delays and the potential for acreage shifting out of early crops and into later season crops. For the week ending April 11, May soybeans gained 40.25 cents while November was 1.25 cents lower.
Soybeans closed higher to start the week as traders positioned themselves ahead of the April 10 USDA supply and demand report. April 8 saw spillover support from wheat markets higher on weather concerns while Brazilian logistic issues returned to the news April 9 to provide support. The bird flu outbreak in China remained a factor, though it was mostly under control by April 8. The export inspections report was at the high end of market estimates and well above the amount needed to keep pace with USDA’s projection.
On report day, soybeans traded slightly higher before the report was released. Upon the report’s release the market jumped to gains of as much as 15.25 cents in the May contract before slipping to trade more narrowly for the balance of the session.
U.S. carryout was left unchanged from the March report at 125 million bushels compared with trade expectations of 137 million bushels.
Crush and export numbers were revised higher while residual use was lowered. Global carryout was raised to 62.6 million metric tons, up from 60.2 million metric tons last month and above trade expectations of 60.1 million metric tons. Production estimates for Brazil and Argentina were unchanged while the market had expected a reduction to both.
The April 11 session had soybeans higher throughout the session while November closed with losses resulting from widespread bull spreading. Additional support for nearby contracts came from tight U.S. supply and concerns over potential delays in soybean shipments from Brazil because of a possible port strike.
The April 11 export sales were below trade expectations but well above the amount needed to keep pace with the USDA’s projection.
USDA reported soybean export inspections pace for the week ending April 5 at 15.3 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.226 billion bushels compared with 1.042 billion bushels for last year at this time. The soybean export sales pace for the week ending April 5 was estimated at 14.1 million bushels (11.7 million bushels for 2012 to ’13), bringing this year’s total to 1.335 billion bushels, compared with 1.182 billion bushels last year at this time. Shipments were reported at 23.7 million bushels.
USDA estimated no barley export shipments for the week ending April 5. No barley exports were reported for the week ending April 5.
In its April numbers, USDA increased imports by 3 million bushels and increased feed demand by 5 million bushels. The net change was a 2 million bushel decrease in stocks, now estimated at 75 million bushels.
The April 11 cash feed barley bids in Minneapolis were at $5 per bushel, while malting barley bids were at $6.25.
USDA reported durum export shipments pace for the week ending April 5 at 2.91 million bushels, with 2.1 million of the bushels going to Turkey. No durum exports were reported for the week ending April 5.
The only change in USDA’s durum 2012 supply and demand estimate came in a 6 million bushel reduction in supply (imports). This followed through to cut durum’s stocks by 5 million bushels to 30 million bushels.
Cash bids for milling quality durum on April 11 were at $7.75 per bushel in Berthold, N.D., while Dickinson, N.D.’s bids were at $7.70.
Canola futures on the Winnipeg, Manitoba, exchange closed with more than $14. (Canadian) gains for the week ending April 11. Canola traded with gains in all four of the sessions last week as tight supply concerns and thoughts that 2013 production could be lower because of unfavorable weather supported the complex. Light support also spilled over from a stronger U.S. soybean complex and from a weaker Canadian dollar.
Cash canola bids on April 11 in Velva, N.D., were at $28.17 per hundredweight.
USDA estimated soybean oil export sales pace for the week ending April 5 at 4 7.7 trillion metric tons. This brings the year-to-date export sales pace for soybean oil to 820.7 trillion metric tons compared with 333.3 trillion metric tons for last year at this time.
Cash sunflower bids April 11 in Fargo, N.D., were at $22.50 per hundredweight.