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Published January 13, 2014, 10:07 AM

New lows ahead of USDA report

Wheat struggled again last week, ending lower, but with Chicago getting hit by far the hardest. Poor export pace estimates combined with improving weather conditions to pressure wheat. Additional selling was tied to position squaring ahead of the Jan. 10 U.S. Department of Agriculture final crop production report, winter wheat plantings report and quarterly grain stocks estimate.

By: Ray Grabanski, Agweek

Wheat: another new contract low

Wheat struggled again last week, ending lower, but with Chicago getting hit by far the hardest. Poor export pace estimates combined with improving weather conditions to pressure wheat. Additional selling was tied to position squaring ahead of the Jan. 10 U.S. Department of Agriculture final crop production report, winter wheat plantings report and quarterly grain stocks estimate.

Wheat started the week higher with early support coming from weather concerns. Weather forecasts are calling for extremely cold weather to grip a majority of the plains states and some of the western regions of Kansas City are vulnerable to winter kill as there is not significant snow cover to protect the crop. Position squaring ahead of the final crop production report was the main feature and brought wheat back to unchanged. Early estimates have all winter wheat planted acreage at 43.5 million, compared with 43.1 million last year.

The Jan. 7 session was quiet as wheat searched for direction. By close, the hard wheat exchanges were able to push into positive territory, while the soft wheat exchange slipped from spillover selling from a lower corn and soybean complex.

Wheat contracts were lower Jan. 8 with Minneapolis ending with small losses, while Chicago was the weakest with March hitting a new contract low. Spillover pressure came from corn and soybeans combined with milder temperatures across much of the U.S.

Wheat put in another new contract low Jan. 9 as traders sold wheat off hard after the release of what is being called the worst export sales estimate for wheat. Of course, this is not fair to wheat as it was for the previous week, which was the week of New Years. Wheat is oversold and in need of a correction, but so far no one wants to stand in front of the train.

USDA estimated wheat export shipments pace for the week ending Jan. 3 at 13.6 million bushels. This brings the year-to-date export shipments pace for wheat to 743 million bushels, compared with 529.1 million for the previous marketing year. Wheat export sales pace for the week ending Jan. 3 was estimated at 4.1 million bushels for old crop wheat and 6.8 million for new crop. This brings wheat’s export sales pace for the year to 903.5 million bushels, compared with 709.3 million the previous marketing year. With 21 weeks left in wheat’s export marketing year, shipments need to average 17 million bushels and sales need to average 9.4 million to make USDA’s 1.1-billion-bushel projection.

Corn: new lows

The corn market had increased selling interest enter the trade last week. Traders remained on the defense ahead of the Jan. 10 report, with expectations that it will be hard to find any bullish news in it. Estimates were that USDA will show an increase in production and stocks. Larger estimates are also surfacing for the South American crop. For the week ending Jan. 9, March was down 11.5 cents.

The corn market traded slightly higher Jan. 6, finding early support from news Mexico bought 110,600 metric tons of corn. There was also some noncommercial short covering as speculators start to liquidate positions prior to the USDA report. The ethanol report was also good for corn use, but stocks have also climbed to four-month highs.

Selling came back into the market by midweek as traders looked ahead to the report. The average trade estimates for the corn yield is 161.2 bushels per acre versus 160.4 bushels per acre in the December report. Production is estimated to be 14.066 billion bushels versus 13.989 billion last month and the ending stocks are 1.861 billion bushels versus 1.792 billion in December. The weather in South America also remains ideal for the development of the corn crop and production estimates continue to climb. The export inspection and sales reports were also disappointing (they were for the short New Year holiday) and that added additional pressure.

Ethanol production for the week ending Dec. 13 averaged 919,000 barrels per day and up 0.66 percent from the previous week. Total ethanol production for the week was 6.433 million barrels. Corn used in production the week ending Dec. 13 is estimated at 96.5 million bushels and needs to average 95.31 million bushels per week to meet this crop year’s USDA estimate. This crop year’s cumulative corn used for ethanol production for this crop year is 1.68 billion bushels. Stocks were 16.14 million barrels, up 3.57 percent from the previous week.

USDA reported corn export shipments pace for the week ending Jan. 3 at 19.3 million bushels. This brings the year-to-date export shipments pace for corn to 472 million bushels, compared with 263.1 million the previous marketing year. Corn export sales pace for the week ending Jan. 3 was estimated at 6.1 million bushels. This brings corn’s export sales pace for the year to 1.13 billion bushels, compared with 502.7 million the previous marketing year. With 34 weeks left in the export marketing year, shipments need to average 28.8 million bushels and sales need to average 9.4 million to make USDA’s export projection of 1.45 billion bushels.

Soybeans: new crop weaker ahead of report

Soybeans closed the week mixed with the front month’s higher as a result of continued strong demand from China. The new contracts struggled from thoughts of increasing world supplies of soybeans. For the week ending Jan. 9, March was 2.5 cents higher, while November fell 28.75 cents.

Soybeans moved higher in quiet trade to open the week. Strong export inspections and solid buying volume led the market higher. South America’s growing conditions remained favorable following rains over the weekend. Traders continue to watch out for potential Chinese cancellations. Jan. 6 export inspections were bullish, coming in well above the amount needed to keep pace with USDA’s projection.

Pressure returned to the soybeans midweek as both Jan. 7 and 8 closed with losses and with the new-crop November contract making its lowest close in three years Jan. 8. Favorable growing conditions and beneficial rainfall in South America weighed on new-crop contracts. Early harvest reports in South America were coming in better than expected, as well. USDA announced a sale of 350,000 metric tons of soybeans to China Jan. 7. This was followed by a sale of 115,600 metric tons to China announced on Jan. 8.

March soybeans traded higher Jan. 9 ahead of the production reports. Traders expect 2013 production to increase to 3.279 billion bushels with carryover at 153 million bushels, down from 155 million in December. Dec. 1 quarterly stocks are expected to be 2.153 billion bushels, versus 1.966 billion last year. World stocks are also expected to increase slightly from the current estimate of 70.6 million metric tons. Strong export demand continues to provide support. USDA announced another new crop sale to China, this time for 110,000 metric tons.

USDA reported soybean export inspections pace for the week ending Jan. 3 at 56.4 million bushels. This brings the year-to-date export shipments pace for soybeans to 922.6 million bushels, compared with 820 million for the previous marketing year at this time. Soybean export sales pace was estimated at 5.7 million bushels. This brings soybean’s export sales pace for the year to 1.498 billion bushels, compared with 1.14 billion last year. With 34 weeks left in soybean’s export marketing year, shipments need to average 16.2 million bushels and sales must be above USDA’s projection of 1.475 billion.

Barley

USDA estimated barley export inspections pace for the week ending Jan. 3 at 48,000 bushels, all going to Mexico. This brings barley’s export shipments pace to 3.63 million bushels, compared with 5.58 million the previous marketing year. USDA reported no barley export sales for the week ending Jan. 3. Barley’s year-to-date export sales pace is at 5.8 million bushels, compared with 5.6 million the previous marketing year. Jan. 9 cash feed barley bids in Minneapolis were at $3.60 per bushel, while malting barley bids were at $5.80.

Durum

USDA estimated durum export inspections pace for the week ending Jan. 3 at 1.15 million bushels, all going to Italy. Durum export sales pace for the week ending Jan. 3 was estimated at 1.2 million bushels. This brings durum’s year-to-date export sales pace to 15.2 million bushels, compared with 15.6 million the previous marketing year. Jan. 9 cash bids for milling quality durum were at $7 per bushel in Berthold, N.D., while Dickinson, N.D., bids were at $6.80.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed close to $11 (Canadian) lower and at new contract lows. Selling was tied to position squaring ahead of USDA’s January crop production report. Light selling was also tied to spillover pressure from a lower U.S. soybean complex. Additional selling was tied to continued reports of adequate supplies of canola in both the U.S. and Canada. Technically, canola is oversold and in need of a correction, but as is the case in wheat, no one is willing to step in front of the train. Jan. 9 cash canola bids in Velva, N.D., were at $16.29 per hundredweight.

Sunflowers

Soybean oil export sales pace for the week ending Jan. 3 was estimated at 33.6 thousand metric tons. This brings the year-to-date export sales pace for soybean oil to 396.2 thousand metric tons, compared with 674 thousand metric tons for the previous marketing year. Jan. 9 cash sunflower bids in Fargo, N.D., were at $19.10 per hundredweight.

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