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Published January 06, 2014, 11:38 AM

Selloff continues in grains

Wheat struggled again last week, month and year.

By: Ray Grabanski, Agweek

Wheat

Wheat struggled again last week, month and year. Technical selling continues to be the main reason for wheat’s inability to recover. Wheat is in need of a corrective bounce, but so far nothing has materialized. For the week, March Minneapolis dropped 9.5 cents, March Chicago dropped 12 cents, and March Kansas City gave back 13 cents. For the month, March Minneapolis dropped 72.25 cents, March Chicago dropped 63.5 cents and March Kansas City gave back 68.75 cents. For the year, Minneapolis declined 29 percent, Kansas City declined 27 percent and Chicago declined 34 percent.

Wheat continued to trade on the defense as the year came to a close. The Dec. 30 session had influence from a lower corn market, as corn sees pressure from continued cancellations of imports from China. Losses accelerated late in the session once the U.S. Department of Agriculture released its bearish export inspections report. It seems a little unfair to say that the most recent export shipments report was bearish since there was one less day used in the calculation.

The Dec. 31 session started under pressure, but by midsession wheat was able to shake off the selling pressure and find a level, which gave traders confidence to buy. December was a rough month for wheat, but maybe now that wheat has traded to major support levels, some buyers will step in to help wheat stage a technical recovery. Technically wheat is in need of a corrective bounce.

After surviving what has to be one of the worst Decembers in wheat’s history, it still cannot find willing buyers. Wheat is extremely over sold and in need of a technical recovery, but so far no one wants to jump in front of the train. Light selling could be attributed to a sharply higher session in the U.S. dollar.

USDA estimated export shipments pace for the week ending Dec. 27 at 13.4 million bushels. This brings the year-to-date export shipments pace for wheat to 729.4 million bushels, compared with 515.4 million bushels for the previous marketing year. Wheat export sales pace was estimated at 9.1 million bushels for old crop and 300,000 bushels for new crop. This brings wheat’s export sales pace for the year to 899.4 million bushels compared with 700.9 million bushels the previous marketing year. With 22 weeks left in wheat’s export marketing year, shipments need to average 16.8 million bushels and sales need to average 9.1 million bushels to make USDA’s 1.1 billion bushel projection.

Corn

Corn traded with losses going into the end of the year because of position squaring and export cancellation concerns. For the week ending Jan. 2, March corn was 7 cents lower. For the month, corn was only off 2.5 cents, showing that corn is trying to put in a bottom. But for the year, corn had one — if not the worst — performance of its life, dropping close to 40 percent.

Corn trade was quiet Dec. 30, on the way to a lower close. Volume was light as the end of the year approached. Beneficial rainfall the last weekend in December in Argentina pressured corn contracts. Plentiful corn supplies continue to weigh on the market. Solid ethanol margins continue to provide some support with production remaining strong.

The Dec. 31 session also saw losses as beneficial rain continued to fall in South America. The rain was expected to continue through the end of last week in Brazil while Argentina is likely to turn drier again this week. Favorable growing conditions in South America and an abundant corn supply continue to pressure corn.

The markets were closed on New Year’s and re-opened at 8:30 a.m. on Jan. 2.

The corn market opened Jan. 2 slightly higher with buying tied to short covering and unwinding of corn and soybean spreads. Sharp losses in soybeans spilled over to pull corn lower into midday, with sharp gains in the U.S. dollar adding to the pressure. But, the market was able to trim its losses late in the session because of noncommercial short-covering. Corn will continue to monitor growing conditions in South America and export cancellations from China as these will be the market movers now.

Ethanol production for the week ending Dec. 27 averaged 913,000 barrels per day and down 1.4 percent versus the previous week. Total ethanol production for the week was 6.391 million barrels. Corn used in production for the week ending Dec. 27 was estimated at 95.87 million bushels and needs to average 95.34 million bushels per week to meet USDA’s estimate. The 2013 crop marketing year cumulative corn used for ethanol production is 1.59 billion bushels. Stocks were 15.58 million barrels and off 0.5 percent versus the previous week.

USDA’s export inspections report was bearish corn at 24.9 million bushels. This brings the year-to-date export shipments pace for corn to 448.8 million bushels compared with 255.8 million bushels the previous marketing year. Last week’s corn export sales pace was estimated at 6.1 million bushels old crop and 800,000 bushels new crop. This brings corn’s export sales pace for the year to 1.12 billion bushels compared with 502.2 million bushels the previous marketing year. With 35 weeks left in the export marketing year, shipments need to average 28.6 million bushels and sales need to average 9.4 million bushels to make USDA’s export projection of 1.45 billion bushels.

Soybeans

Soybeans dropped hard the last week of December as improving weather and year end profit-taking took center stage. South America received beneficial rains the end of December and temperatures have moderated, giving the crop in South America almost perfect weather as the growing season begins. For the week ending Jan. 2, March was 43.75 cents lower. For the month, soybeans dropped 25.25 cents. For the year, soybeans declined only 7 percent.

Soybeans closed lower Dec. 20 in soft trade as the year ended. Favorable growing conditions in South America continue to weigh on the market with beneficial rain having fallen the last week of December. Additional showers were expected over the weekend. The soybean market remains wary of potential cancellations of sales to China, though none have been confirmed yet. Tight soybean supplies continue to provide underlying support.

The Dec. 31 session had soybeans falling to their lowest close in five weeks. Pressure was tied to beneficial rain falling in South America. Traders expect a record South American crop and increased planted acreage in the U.S. this spring, leading to lower prices despite tight supplies.

On Jan. 2, soybeans traded sharply lower with heavy commercial selling tied to news out of South America. Growing conditions remain favorable with improved weather in the northern and central growing areas, while early harvest has begun in Mato Grosso. A lack of fresh export news added pressure. Sharp gains in the U.S. dollar topped off the bearish argument. Soybeans were able to trim losses late as they closed nearly 8 cents off the day’s lows.

USDA reported soybean export inspections pace at 43.2 million bushels for the week ending Dec. 27. This brings the year-to-date export shipments pace for soybeans to 865.6 million bushels compared with 779.9 million bushels for last year at this time. Soybean export sales pace was estimated at 34.7 million bushels old crop and 8.7 million bushels new crop for the week ending Dec. 27. This brings soybean’s export sales pace for the year to 1.49 billion bushels compared with 1.13 billion bushels the previous marketing year. With 35 weeks left in soybean’s export marketing year, shipments need to average 17.4 million bushels and sales above USDA’s projection of 1.475 billion bushels.

Barley

USDA reported no barley export shipments for the week ending Dec. 27. This brings barley’s export shipments pace to 3.58 million bushels compared with 5.58 million bushels in 2012. USDA reported no barley export sales for the week ending Dec. 27. Barley’s year-to-date export sales pace is at 5.8 million bushels compared with 5.6 million bushels the previous marketing year. Cash feed barley bids on Jan. 2 in Minneapolis dropped to $3.60 per bushel while malting barley bids dropped to $5.80.

Durum

USDA reported no durum export shipments for the week ending Dec. 27. Durum export sales pace was estimated at 100,000 bushels. This brings durum’s year-to-date export sales pace to 14 million bushels compared with 15.6 million bushels in 2012. Cash bids for milling quality durum on Jan. 2 were at $7 per bushel in Berthold, N.D., while Dickinson, N.D.’s, bid for hard amber durum was $5.95.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed with $3.50 (Canadian) gains. Canola started off last week with gains tied to technical buying as the funds took profits ahead of year end. Additional support was prompted by thoughts that canola demand will increase after the first of the year because of canola being a better value when compared with other vegetable oil markets. Late last week, canola retreated because of spillover pressure from a sharply lower U.S. soybean complex. Selling was also tied to an increase in farmer selling. Cash canola bids on Jan. 2 in Velva, N.D., were at $17.84 per hundredweight.

Sunflower

Soybean oil export sales pace for the week ending Dec. 27 was estimated at 23.1 thousand metric tons. This brings the year-to-date export sales pace for soybean oil to 404.7 thousand metric tons compared with 663.2 thousand metric tons for the previous marketing year. Cash sunflower bids on Jan. 2 in Fargo, N.D., were at $19.40 per hundredweight.

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