Wheat: production concerns supportive
Wheat traded with gains for most of last week with most of the strength coming from another week of declining winter wheat conditions, as well as from slow planting progress in the Northern Plains. For the week ending May 23, July Minneapolis gained 9.5 cents, September Minneapolis gained 10 cents, July Chicago gained 20 cents and July Kansas City gained 17.25 cents.
Weather remains a challenge for wheat, with dry conditions hurting winter wheat to the south while rains hinder spring wheat planting farther north. Wheat production is expected to be strong outside of the U.S. This is further supported by an improved Russian weather forecast.
Wheat started last week with gains, with all three of the exchanges gaining ground on May 20. The May 21 session was a little more mixed with Minneapolis firm, while the winter wheat exchanges were lower. The forecast looks promising, with beneficial rains for the western plains and drier weather to facilitate planting in the Northern Plains.
Wheat traded mixed May 20, with most of the buying strength appearing in the winter wheat exchanges while Minneapolis traded sluggish. The winter wheat exchanges were supported by concerns about production. Additional support spilled over from a stronger corn and soybean complex. Minneapolis did not perform well May 24. Early selling was tied to the previous week’s better-than-expected planting progress. Additional selling was tied to the unwinding of long Minneapolis short winter wheat spreads (which pressured Minneapolis and supported Kansas City and Chicago).
The May 23 session started higher and unlike the other grains, was able to hold on to most of its gains going into the close. Early support was from a better-than-expected export sales estimate, as well as from rumors that China was interested in buying U.S. wheat. Additional support came from concerns about planting progress of spring wheat, as recent rains in the Northern Plains has prevented producers from making progress last week. A small window for planting developed late in the week, but forecasts for the weekend are calling for another rain event that will halt planting.
The U.S. Department of Agriculture’s wheat export inspections for the week ending May 17 were estimated at 21.1 million bushels. Wheat export sales pace for the week ending May 17 was estimated at a combined total of 35 million bushels with 8.8 million old crop and 26.2 million new crop. With two weeks left in the marketing year, shipments need to average 29.5 million bushels and sales need to average 14.8 million to make USDA’s expectations of 1.025 billion bushels.
As of May 19, 67 percent of the nation’s spring wheat crop was planted, compared with 43 percent the previous week and 76 percent for the five-year average. Twenty-two percent of the nation’s spring wheat was emerged, compared with 10 percent the previous week and 49 percent for the five-year average. Forty-three percent of the nation’s winter wheat was headed, compared with 29 percent the previous week and 62 percent for the five-year average. USDA estimated the nation’s winter wheat crop condition rating at 31 percent good to excellent, 28 percent fair and 41 percent poor to very poor, a decrease of 1 percent from the previous week.
Corn: China buys US corn
Corn traded firmer last week, ending with small gains. Light buying interest resurfaced last week with fresh export news and a friendly ethanol report. The upside was limited with a record week of planting. For the week ending May 23, July gained 10 cents and December was up 14 cents.
Corn struggled on May 20 and 21. Early week pressure came from traders expecting a large number in the May 20 crop progress report for corn planting. The weather was open and allowed widespread planting, while the average trade estimate was 63 to 70 percent planted. The report stated that 71 percent of the corn is planted, a 43 percent jump from the previous week. Farmers planted a record 41.8 million acres of corn, while the largest week on record was 32 million acres planted in 1992. Additional weakness came from a disappointing export inspections report.
The market rebounded on May 22 because of a friendly ethanol report and announcements of fresh export sales. China bought 360,000 metric tons of corn and another 180,000 metric tons went to an unknown destination for new crop. The ethanol report was also supportive, showing the largest weekly production since June of 2012. Stocks were also down and to the lowest level last seen since November 2010 and there have been no imports in the past month. The futures traded slightly higher on May 23, with follow-through support from May 22 and news of fresh demand.
Ethanol production for the week ending May 17 averaged 875,000 barrels per day, down 4.8 percent from last year. Corn used in production the week ending May 17 was estimated at 91.9 million bushels and needs to average 94.42 million per week to meet this crop year’s USDA estimate of 4.6 billion bushels. Stocks as of May 17 were 16.18 million barrels, down 24.5 percent from last year.
The crop progress report showed 71 percent of the corn is planted, versus 95 percent one year ago and a five-year average of 79 percent. Corn that is emerged was at 19 percent versus 73 percent one year ago and a five-year average of 46 percent.
USDA’s export inspections report was bearish for corn, as there were 14.6 million bushels shipped. Shipments needed each week to hit the USDA export estimate are 15.5 million bushels. The export sales report for corn was at 4.1 million bushels, below the 4.8 million needed to meet USDA’s projection of 750 million bushels.
Soybeans: strong demand continues
Soybeans traded with good strength last week, with strong old crop demand helping support the old crop months, while the new crop months were supported by planting progress concerns, as many traders think producers will concentrate on planting corn and wait with soybean planting until this week. For the week ending May 23, July soybeans gained 51.5 cents, while November improved by 30.5 cents.
Soybeans struggled to start the week because of a bearish outlook for new crop, but continued strong commercial demand for old crop soybeans helped soybeans bounce higher. Weather forecasts calling for rain put pressure on deferred contracts because of increased expectations of corn acres switching to soybeans.
The May 21 session was mixed with all months except July ending with losses. July closed near the day’s high as tight old crop supplies continue to provide support. The outlook for new crop remains bearish, though strong corn planting progress the week ending May 17 took some pressure off with a reduced likelihood of switching acres to soybeans. Brazil’s shipping situation appears to be improving, while China’s crush margins grow softer, both of which are negative factors for soybean futures. The May 22 session saw strong gains across the board from improving demand outlook. Additional support came from rumors of potential plant shutdowns, which likely led to the late surge in old crop contracts.
Soybeans opened the May 23 session higher. The old crop months were the strongest performers, with July pushing to post as much as 50-cent gains at one point. Early support was from stronger demand, as rumors have China in the market looking to cover product that it cannot get out of Argentina (the dock strike in Argentina has created a back log of about 50 boats sitting in ports waiting to get loaded). This pushed soybeans through resistance levels and into buy stops, which helped soybeans rally to levels not seen since Sept 2012. But that is also where sell stops were triggered, which caused the soybean market to crash. Technical damage was done, as the market tested eight-month highs and failed.
USDA reported soybean export inspections pace for the week ending May 17 at 3.3 million bushels. Soybean export sales pace was estimated at a combined total of 37.5 million bushels with 6.7 million old crop and 30.8 million new crop. With 15 weeks left in the marketing year, shipments need to average 6.1 million bushels and sales need to average 200,000 bushels to make USDA’s expectations of 1.35 billion.
As of May 19, 24 percent of the nation’s soybean crop was planted, compared with 6 percent the previous week and 42 percent for the five-year average. Emergence was estimated at 3 percent, compared with none the previous week and 14 percent for the five-year average.
No export inspections for barley were reported the week of May 17. Barley export sales pace was estimated at 100,000 bushels, all going to Taiwan.
May 23 cash feed barley bids in Minneapolis were at $4.95 per bushel, while malting barley bids were $6.60.
USDA reported durum export shipments pace for the week ending May 17 at 829,000 bushels, with 714,000 bushels going to Algeria. Durum-export sales pace was estimated at a combined total of 2 million bushels, with 800,000 bushels being old crop, while 1.2 million were reported for new crop.
May 23 cash bids for milling quality durum were at $8.25 per bushel in Berthold, N.D., while Dickinson, N.D., bids were at $8.
Canola futures on the Winnipeg, Manitoba, exchange ended the week with $16.30 (Canadian) gains. Canola started the week with sharp gains, but ended the week with little fanfare. Early week strength spilled over from continued concerns about tight old crop supplies, as well as from decent demand from domestic crushers. A weaker Canadian dollar added support. Late week selling was tied to pressure from a sloppy performance in the U.S. soybean complex. Additional selling was tied to other negative fundamental issues (stronger Canadian dollar, planting progress).
May 23 cash canola bids in Velva, N.D., were at $28.37 per hundredweight.
USDA estimated soybean oil export sales pace for the week ending May 17 at 9.6 trillion metric tons, with most going to South Korea and Mexico. This brings the year-to-date export sales pace for soybean oil to 837.1 trillion metric tons, compared with 420.5 trillion last year.
May 23 cash sunflower bids in Fargo, N.D., were at $22.75 per hundredweight.
Editor's Note: Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach Grabanski at 800-450-1404.