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Published October 07, 2013, 11:47 AM

USDA stocks report bearish

Wheat continues to be the bright spot in the commodity sector.

By: Ray Grabanski, Agweek

Wheat

Wheat continues to be the bright spot in the commodity sector. Not only has wheat been seeing technical strength, but the fundamental picture has also turned positive. For the month, December Minneapolis lost 1.5 cents, December Chicago gained 24.5 cents, and December Kansas City gained 36 cents. For the week ending Oct. 3, December Minneapolis gained 18.75 cents, December Chicago was up 6.25 cents, and December Kansas City gained 23.75 cents.

Wheat traded with gains to start the week because of a better-than-expected export inspections report. Additional support came from position squaring ahead of the U.S. Department of Agriculture quarterly grains stocks report and small grains summary report. The reports were friendly to wheat. The quarterly grain stocks estimate put wheat stocks at 1.855 billion bushels, compared with expectations of 1.9 billion and 2.11 billion for last year at this time. The small grains summary report was neutral for wheat, as it put all wheat production at 2.128 billion bushels, compared with expectations of 2.11 billion. All winter wheat production was estimated at 1.534 billion bushels, compared with expectations of 1.54 billion. Spring wheat production was estimated at 532 million bushels, compared with expectations of 512 million. Wheat yields were estimated at a record 47.1 bushels.

The Oct. 1 session showed strength continuing in wheat, bucking the trend set by corn and soybeans. Wheat seems to be concentrating on the fact that demand remains strong and even though there was a slight hike in wheat production, wheat stocks continue to decline. Spring wheat harvest is near complete and producers need a little incentive to plant winter wheat, which they seem to be getting in higher prices.

Wheat continued to trade higher Oct. 2 and is the bright spot of the commodities. Strong export demand and technical buying continues to help push wheat. A weaker U.S. dollar added strength to wheat. Technically, wheat has made a strong push and a slight retracement might be in order.

Wheat traded with solid gains Oct. 3. Wheat closed at 14-week highs as traders continue to cover short position. Additional support came from forecasts calling for rain for much of the U.S. This will delay spring wheat harvest (which will likely result in decreased quality), as well as the planting of winter wheat. The rain is also expected to cause issues in Canada, as it will delay harvest progress and cause crop deterioration. Wheat is getting toppy and the Oct. 3 close signaled that, as wheat was trading with 10 cents gains for much of the day but slipped to only end 3 to 5 cent higher.

USDA’s export inspections for wheat were estimated at 32.97 million bushels for last week. This brings the year-to-date shipments pace to 496.5 million bushels, compared with 355.8 million bushels last year. With 35 weeks left in wheat’s export marketing year, shipments will need to average 17.2 million bushels to make USDA’s export expectations of 1.1 billion bushels.

As of Sept. 29, spring wheat harvest is estimated at 95 percent, compared with 93 percent the previous week and 96 percent for the five-year average. Winter wheat planting progress is estimated at 39 percent complete, compared with 23 percent the previous week and 40 percent for the five-year average.

Corn

The corn market was under pressure last week, as December traded to lows last seen in August 2010. Selling entered the market as the USDA quarterly stocks report showed more corn on hand than expected. The larger-than-expected old crop corn stocks and increasing yield estimates could offset any acreage reduction in the upcoming reports. For the week ending Oct. 3, December dropped 15 cents.

The corn market closed with double-digit losses on Sept. 30 because of a bearish USDA stocks report. The quarterly stocks were estimated at 681 million bushels, while USDA actual estimate was 824 million bushels, 143 million more than estimated and 74 million larger that the highest trade estimate. The crop conditions report was expected to show little change in corn’s condition and estimates were that 15 percent of the crop was harvested. The report showed a 1 percent increase in the excellent category and stated that 12 percent of the crop is harvested.

Corn traded lower again on Oct. 1. Selling continued to enter the market from the larger stocks in the USDA report. Open interest was up more than 12,000 contracts on Oct. 1, as the funds added to their short position. There was no threat of frost again last week and the late season rains and heat are helping this year’s crop reach maturity. Harvest is progressing and yields are better than expected in most areas of the country.

The futures quieted down on Oct. 2 and 3, closing unchanged. The market did find some spillover support from the wheat markets and moisture in the Upper Midwest will delay harvest. But buying interest remained on the sidelines because of uncertainty from the government shutdown.

Ethanol production for the week ending Sept. 27 averaged 875,000 barrels per day, up 5.2 percent from the previous week. Total ethanol production for the week was 6.125 million barrels. Corn used in production the week ending Sept. 27 is estimated at 91.88 million bushels versus 94.4 million bushels needed per week to reach the USDA projection for this year. Stocks were 15.5 million barrels and down 0.67 percent versus the previous week.

The crop progress report showed corn that is dented was at 96 percent versus 100 percent one year ago and a five-year average of 97 percent. Corn that is mature was at 63 percent versus 93 percent one year ago and a five-year average of 70 percent. Corn that was harvested was at 12 percent versus 52 percent one year ago and a five-year average of 23 percent. The condition is rated as 55 percent good to excellent, 29 percent fair and 16 percent poor to very poor.

Soybeans

Soybeans struggled again last week with pressure coming from continued reports of better-than-expected yields. Adding selling pressure was USDA’s bearish quarterly grains stocks report. For the week ending Oct. 3, November dropped 31.5 cents, while January declined 32.5 cents.

Soybeans were trading moderately lower ahead of the USDA quarterly grains stocks report, but fell sharply after the report was released. The report pegged soybean stocks at 141 million bushels, higher than the average trade guess of 124 million. This bearish report combined with continued excellent harvest weather and speculative long liquidation to push the market to the sharply lower close. The Sept. 30 export inspections were bearish, coming in well below the amount needed to keep pace with USDA’s projection.

Soybeans traded lower again Oct. 1, with follow-through selling from the bearish quarterly grain stocks report. The Sept. 30 crop progress report applied some pressure, as well, with crop conditions improving from the previous week. Talk of higher-than-expected yields continues. A sale of 113,000 metric tons of soybeans to China was announced Oct. 1.

Soybeans closed higher Oct. 2 and 3, with support tied in part to rain delays for the harvest into the weekend. Gains in wheat and losses in the U.S. dollar provided additional support. Continued talk of better-than-expected early yields was seen as a limiting factor. Because of the government shutdown there is no news coming out of USDA, keeping trade slow and volume light.

USDA reported soybean export inspections pace for the week ending Sept. 27 at 14.3 million bushels. This brings the year-to-date export shipments pace for soybeans to 35.9 million bushels, compared with 76.9 million for last year at this time. Soybean export sales were not reported Oct. 3 because of the government shutdown.

As of Sept. 29, soybeans dropping leaves were at 67 percent, compared with 47 percent the previous week and 74 percent for the five-year average. Soybeans harvested were at 11 percent, compared with 3 percent the previous week and 20 percent for the five-year average. Soybean’s crop condition rating was up 3 percent at 53 percent good to excellent, 32 percent fair and 15 percent poor to very poor.

Barley

USDA reported barley export shipment pace for the week ending Sept. 27 at 69,000 bushels, with 60,000 bushels going Mexico and 9,000 to Korea. This brings barley’s export shipment pace to 2.45 million bushels, compared with 4.46 million last year. USDA’s weekly export sales report was not released because of the government shutdown.

USDA estimated the U.S. barley crop at 215.08 million bushels (2 percent less than last year) with planted acreage at 3.48 million, harvested acreage at 3 million and a yield of 71.7 bushels per acre. Barley stocks were estimated at 196 million bushels, slightly lower than last year.

Cash feed barley bids in Minneapolis were not reported because of the government shutdown.

Durum

USDA reported durum export shipments pace for the week ending Sept. 27 at 808,000 bushels, all going to Italy. USDA’s weekly export sales report was not released because of the government shutdown.

USDA estimated durum’s production at 61.5 million bushels (a 26 percent decline from last year) with planted acreage at 1.47 million, harvested acreage at 1.42 million (33 percent decline from last year) and a yield of 43.3 bushels per acre. Durum stocks were estimated at 66.8 million bushels, 2 percent lower than last year.

As of Sept. 29, North Dakota’s durum harvest progress was estimated at 83 percent, compared with 83 percent the previous week and 92 percent for the five-year average.

Cash bids for milling quality durum were at $7 per bushel in Berthold, N.D., while Dickinson, N.D., bids increased 10 cents to $6.85.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending Oct. 3 with 20 cent gains. Canola started the first half of the week on the defense, as selling spilled over from a lower U.S. soybean complex, as well as from a bearish USDA quarterly grain stocks report. Late session strength came from technical buying, as well as from forecasts for rain for much of the Northern Plains, which will slow harvest activity.

As of Sept. 29, North Dakota’s canola harvest was estimated at 85 percent complete, compared with 82 percent for the previous week and 94 percent for the five-year average.

Cash canola bids in Velva, N.D., were not reported because of the government shutdown.

Sunflowers

All sunflower stocks were estimated at 339 million pounds, 78 percent more than last year. Oil sunflower stocks were at 276 million pounds, while nonoil sunflower stocks were at 63.2 million.

As of Sept. 29, 1 percent of North Dakota’s sunflower crop was harvested, compared with zero the previous week and 3 percent for the five-year average. North Dakota’s sunflower crop condition rating decreased 3 percent to 73 percent good to excellent, 21 percent fair, and 6 percent poor.

Cash sunflower bids in Fargo, N.D., were not reported because of the government shutdown.

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