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Published December 09, 2013, 10:13 AM

Statistics Canada report bearish

Wheat traded on the defense last week, losing ground in almost every session. Selling pressure was caused by poor exports and a bearish Statistics Canada report (which reported record Canadian production). For the week ending Dec. 5, March Minneapolis dropped 23.25 cents, March Chicago dropped 16.75 cents, and March Kansas City dropped 25.5 cents.

By: Ray Grabanski, Agweek

Wheat

Wheat traded on the defense last week, losing ground in almost every session. Selling pressure was caused by poor exports and a bearish Statistics Canada report (which reported record Canadian production). For the week ending Dec. 5, March Minneapolis dropped 23.25 cents, March Chicago dropped 16.75 cents, and March Kansas City dropped 25.5 cents.

Wheat started last week on the hope of seeing the plus side of the ledger. Traders were expecting the prior week’s better demand outlook to help give wheat life last week. But those hopes faded once the U.S. Department of Agriculture released a bearish weekly export inspections estimate. Selling was also tied to spillover selling from a poor performing soybean market. A stronger U.S. dollar added selling pressure.

The Dec. 3 session had wheat higher in quiet trade with cold temperatures and snow in the forecast providing support. Commercial buying indicated possible export sales, and strong global demand remains favorable. Additional support was tied to a firmer corn market and weakness in the U.S. dollar.

Wheat contracts closed near the day’s lows on Dec. 4, following a bearish production report from Stats Canada. Wheat production was pegged at 37.5 million metric tons, an increase of 38 percent from 2012. Harvested area and average yield increased 10 and 25 percent, respectively. This was a larger increase than traders had expected. Cold weather moving into the U.S. Plains and strength in corn contracts limited losses.

Wheat started the Dec. 5 session off on the defense with early pressure spilling over from a bearish Stats Canada report (which estimated Canada’s wheat crop at a record). Additional selling pressure was a result of a bearish export sales estimate. Traders were expecting improving U.S. wheat export pace now that wheat has dropped to recent lows, but most wheat importers are still shying away from the U.S. and buying their needs elsewhere. A lower corn market spilled over to pressure the wheat exchanges as well. Trading is thin and it appears that the holiday doldrums has set in early.

USDA estimated the export shipments pace for wheat for the week ending Nov. 29 at 15.5 million bushels. This brings the year-to-date export shipments pace for wheat to 659.1 million bushels compared with 461.5 million bushels for last year. The wheat export sales pace for the week ending Nov. 29 was estimated at 8.4 million bushels. This brings wheat’s export sales pace for the year to 830.6 million bushels compared to 606.1 million bushels last year. With 26 weeks left in wheat’s export marketing year, shipments need to average 16.96 million bushels and sales need to average 10.4 million bushels to make USDA’s 1.1 billion bushel projection.

Corn

Corn continued to trade in a sideways range last week. The upside remained limited with news China rejected corn shipments. Exports have been decent the past couple of months, but are front loaded and traders are concerned over cancellations. For the week ending Dec. 5, March was up 9 cents and corn was forming a weekly upside reversal.

The corn market started the week with small gains. The futures traded to the recent low of $4.10 on Dec. 2, creating short covering. Speculators continue to hold a large short position and realized some of those profits. Ethanol margins are also good and demand from the plants for corn remains strong. The export inspections were friendly and slightly above estimates.

Pressure came back into the trade Dec. 5. Downside weakness came from news that China has now rejected a total of five cargos of corn. Exporters are now trying to slow shipments until the genetically modified variety is approved so that more cargos are not rejected. Additional weakness came from a big number for corn in the Stats Canada production report as well as from an export sales estimate which came in below estimates. The International Grains Council estimate for China’s 2013 production came in at 217.5 million metric tons versus the current USDA estimate of 211 million metric tons. China’s imports were estimated at 5 million metric tons versus USDA’s estimate of 7 million metric tons. The weather in South America is currently ideal for the development of this year’s crop, and Brazil is considering using corn for ethanol.

Ethanol production for the week ending Nov. 29 averaged 913,000 barrels per day, down 1.5 percent versus the previous week. Total ethanol production for the week was 6.391 million barrels. Corn used in production was estimated at 95.87 million bushels as compared with an average of 94.28 million bushels needed each week to meet the USDA estimate for the year. Stocks were 15.12 million barrels and up 0.68 percent versus the previous week.

USDA’s export inspections report was friendly for corn at 35.7 million bushels. The corn export sales were estimated at 23.4 million bushels. This brings the year-to-date sales pace for corn to 1.023 billion bushels compared to 481 million bushels for last year. With 39 weeks left in corn’s export marketing year, shipments need to average 27.7 million bushels and sales need to average 9.7 million bushels to make USDA’s export projection of 1.4 billion bushels.

Soybeans

Technical selling hit the soybean complex last week. Export demand continued to be strong, but cancellation concerns were starting to surface because of the year’s rapid pace of sales and slow pace of shipments. For the week ending Dec. 5, January soybeans were 8.5 cents lower.

Soybeans closed lower Dec. 2 and 3 on aggressive noncommercial selling and a lack of supportive news. Dec. 2 selling was sparked in part by ideas the market is overbought. Potential for record soybean production in South America remains a negative factor, and weather looks favorable in the near term with a beneficial rain forecast for last week. The export inspections were below expectations but above the amount needed to keep pace with the USDA’s projection.

On Dec. 4, soybeans closed near the day’s highs with support from speculative buying. Soybean demand remains supportive with talk that demand should remain strong in the near-term. The Dec. 4 Stats Canada report pegged Canadian production at a record 5.2 million metric tons. This was in spite of a decline in average yield of 5.6 percent.

Soybeans closed mostly lower in quiet trade before settling a few cents off the day’s highs on Dec. 5. Favorable South American weather and growing concerns about a trade dispute with China provided pressure. China is making controversial moves with regards to their airspace, and traders are concerned this could spill over to impact trade relations. The Dec. 5 export sales came in well above the amount needed to keep pace with the USDA’s projections.

USDA reported soybean export inspections pace for the week ending Nov. 29 at 52.6 million bushels. This brings the year-to-date export shipments pace for soybeans to 638.7 million bushels compared with 605.6 million bushels for last year at this time. The soybean export sales pace for the week ending Nov. 29 was estimated at 29.6 million bushels, bringing this year’s total to 1.381 billion bushels, compared to 1.044 billion bushels last year at this time. With 39 weeks left in soybean’s export marketing year, shipments need to average 20.8 million bushels and sales need to average 1.8 million bushels to make USDA’s export projection of 1.45 billion bushels.

Barley

USDA reported no barley export shipments or sales for the week ending Nov. 29. This brings barley’s export shipments pace to 3.29 million bushels compared to 5.57 million bushels last year. Year-to-date export sales pace for barley is at 5.4 million bushels compared to 5.6 million bushels last year. Dec. 5 cash feed barley bids in Minneapolis were at $3.40 per bushel while malting barley was $5.50.

Durum

USDA reported durum export shipments pace for the week ending Nov. 29 at 110,000 bushels. Durum export sales pace was estimated at 100,000 bushels. This brings durum’s year-to-date export sales pace to 10.7 million bushels compared to 12.5 million bushels last year. Dec. 5 cash bids for milling quality durum were at $7 per bushel in Berthold, N.D., while Dickinson, N.D.’s bid was at $6.90.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending Dec. 5 with $9.60 (Canadian) losses. Canola was under pressure for the first three sessions last week because of spillover selling pressure from a lower U.S. soybean complex. Additional selling was tied to position squaring ahead of and after the release of a negative Stats Canada production report, which put Canada’s canola production at a new record. Stats Canada’s report pegged production at 18 million metric tons, up 29.5 percent from 2012. The Dec. 5 session saw small gains with strength spilling over from a stronger U.S. soybean complex. Strong domestic demand added some support. Dec. 5 cash canola bids in Velva, N.D., were at $19.96 hundredweight.

Sunflowers

Soybean oil export sales pace for the week ending Nov. 29 were estimated at 1.4 trillion metric tons. This brings the year-to-date export sales pace for soybean oil to 268.4 trillion metric tons compared to 589.8 trillion metric tons for last year. Dec. 5 cash sunflower bids in Fargo, N.D., were $19.65 per hundredweight.

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