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Published February 10, 2014, 10:02 AM

Grains rally on fresh demand news

Wheat contracts had strong gains last week. Winter weather concerns and noncommercial short-covering were the main supportive factors. For the week, March Minneapolis gained 37 cents, March Chicago was up 28 cents and March Kansas City gained 40 cents.

By: Ray Grabanski, Agweek

Wheat: strong rally in old crop

Wheat contracts had strong gains last week. Winter weather concerns and noncommercial short-covering were the main supportive factors. For the week, March Minneapolis gained 37 cents, March Chicago was up 28 cents and March Kansas City gained 40 cents.

A winter storm moving across the U.S. winter wheat belt last week caught noncommercial traders with heavy short positions, causing a sharp short-covering rally. The market had become heavily oversold after trending lower for several months. When traders started to buy back short positions, there was little selling interest left, so the market rallied quickly. Commercial buying also has been evident, with front months gaining on the deferred contracts.

Statistics Canada released its Dec. 31 stocks report, with total wheat stocks of 28.4 million metric tons. This was slightly below expectations, but 38 percent above last year. While wheat stocks in Canada are plentiful, transportation issues and frigid weather have kept much of the wheat from coming to market. This has been reflected in strong spring wheat basis and an inverted nearby futures market. Wheat did take a breather and trade lower on Feb. 6. Export sales were strong, but shipments continue to lag.

While the winter storm started the rally, the long-term effects on the crop could be positive, with significant snowfall across Kansas and Missouri. Concerns about winterkill should be minimal in the areas that received snow, but cold temperatures were also forecast into the weekend for some areas of the southern plains that have little or no snow cover. That provided support into Feb. 7 trade.

U.S. Department of Agriculture estimated wheat export inspections pace for the week ending Jan. 31 at 11.7 million bushels. This brings the year-to-date export shipments pace for wheat to 810.5 million bushels, compared with 599.7 million for last year. Wheat export sales pace the week ending Jan. 31 was estimated at 27 million bushels, above the 9.2 million needed to keep pace with USDA projections. This brings wheat’s export sales pace for the year to 980.8 million bushels, compared with 771.5 million last year. Shipments of 13.5 million bushels were below the 19.9 million needed to keep pace with projections.

Corn: strong exports give boost

The corn market traded to a three-month high last week, with news of more export demand. Export announcements have increased the past few weeks and that has created buying interest in the corn market. Traders are also looking ahead to the USDA report on Feb. 10 and expect to see smaller stocks numbers for the U.S. and world. As of the Feb. 6 close, the March contract was up 9 cents for the week.

Corn futures found support from fresh export sale announcements for the first three days of last week, with 114,000 metric tons on Feb. 3 to an unknown destination, 65,000 metric tons on Feb. 4 to South Korea and 237,000 metric tons on Feb. 5 to an unknown destination. Southern Brazil has some dry areas, but Argentina has received some widespread rain. The U.S. is also experiencing wintery weather and cold temperatures that are disrupting transportation to the elevators. A private firm also released its corn production estimates last week and lowered its number for South America.

Corn futures were higher again on the morning of Feb. 6, but softened into the afternoon. Early support came from a strong number in the export sales report, and traders were also expecting a smaller stocks number in the Feb. 10 USDA report. Buying interest did slow into the afternoon, as USDA announced a 220,000 metric ton cancellation from China. This was the seventh week in a row that China has canceled a U.S. corn purchase. Corn export shipments are also running 14 percent behind what is needed to meet projections.

Ethanol production for the week ending Jan. 31 averaged 895,000 barrels per day, down 0.56 percent from the previous week. Total ethanol production for the week was 6.26 million barrels. Corn used in production the week ending Jan. 31 is estimated at 93.8 million bushels and needs to average 97.18 million bushels per week to meet this year’s USDA estimate of 5 billion bushels. This year’s cumulative corn used for ethanol production is 2.06 billion bushels. Stocks were 16.73 million barrels, down 1.14 percent from the previous week.

Last week’s export inspections report was bearish for corn at 21.6 million bushels, versus the 29 million needed to meet USDA projections. Corn export sales were estimated at 71.1 million bushels, which was well above the 6.3 million needed to stay on pace with USDA’s estimate of 1.45 billion. The shipments came in at 29.4 million bushels, above the 28.7 million needed each week to meet USDA’s estimate.

Soybeans: dry conditions in Brazil provide support

As of the Feb. 6 close, March soybeans were 43 cents higher for the week, while the November contract gained 14 cents.

Soybeans traded higher Feb. 3 with another round of bullish export inspection numbers. South American weather remains in the news and is more mixed for Brazil as current dryness is beneficial to early soybean harvest while it hinders the growth of late-planted beans. Feb. 3 export sales came in well above the amount needed to keep pace with USDA’s projection.

Soybeans moved higher Feb. 4 with concerns growing about dry conditions in Brazil. The dry conditions are good for early harvest, but there is potential for damage to late-planted beans. Conditions remain favorable in Argentina with another round of rain in the forecast. Informa released production estimates for South America with Brazil coming in at 89.7 million metric tons, while Argentina came in at 57 million. Statistics Canada reported an increase of 2.4 percent in total soybean stocks to 2.7 million metric tons as of Dec. 31.

Soybeans closed with gains on Feb. 5 and 6 with another round of bullish export sales numbers providing support on Feb. 6. Active commercial buying tied to dry South American weather provided support, despite a large crop still being expected. Potential Chinese cancellations that have hung over the market for a number of weeks are still possible, but have not yet surfaced. Traders began to position themselves ahead of the Feb. 10 USDA report.

USDA reported soybean export inspections pace for the week ending Jan. 31 at 45.4 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.161 billion bushels, compared with 1.006 billion for last year at this time. Soybean export sales pace for the week ending Jan. 31 was estimated at 21.2 million bushels. This brings soybean’s export sales pace for the year to 1.581 billion bushels compared with 1.254 billion bushels last year. With 30 weeks left in soybean’s export marketing year, sales are above USDA’s projection of 1.495 billion.

Barley

USDA estimated barley export inspections pace for the week ending Jan. 31 at 1.698 million bushels with all of the bushels going to Columbia. This brings barley’s export shipments pace to 6.058 million bushels, compared with 5.591 million bushels last year. Barley export sales pace for the week ending Jan. 31 was estimated at 32,400 metric tons. For the week ending Feb. 6, cash feed barley bids in Minnepaolis were unchanged at $3.70 per bushel, while malting barley bids increased to $5.65.

Durum

There were no export inspections reported for durum the week ending Jan. 31. Durum export sales pace for the week ending Jan. 31 was estimated at 0.4 million bushels. This brings durum’s year-to-date export sales pace to 17.4 million bushels, compared with 16.8 million last year. As of the Feb. 6 close, cash bids for milling quality durum were unchanged on the week at $7 per bushel in Berthold, N.D., while the Dickinson, N.D., bid increased to $6.80.

Canola

As of the Feb. 6 close, March canola futures on the Winnipeg, Manitoba, exchange were $1.70 (Canadian) lower on the week at $428.50 (Canadian). Ongoing logistical issues pressured canola futures on Feb. 3 and 5, while weakness in Chicago Board of Trade soyoil futures provided additional pressure on Feb. 3. Strength in CBOT soybeans and soyoil provided support throughout the rest of the week. On Feb. 4, Statistics Canada reported stocks at 12.6 million metric tons, compared with 8.1 million last year at this time. This report was seen as bearish. As of the Feb. 6 close, cash canola bids in Velva, N.D., were 15 cents higher on the week at $17.53 per hundredweight.

Sunflowers

Soybean oil export sales pace for the week ending Jan. 31 was estimated at 26 thousand metric tons. This brings the year-to-date export sales pace for soybean oil to 466 thousand metric tons, compared with 758.8 thousand metric tons for last year. As of the Feb. 6 close, July soybean oil was up $1.02 per hundredweight for the week at $38.66. Cash sunflower bids in Fargo, N.D., were 25 cents higher for the week at $19.40 per hundredweight.

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