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Published February 17, 2014, 10:22 AM

Markets focused on export business

Wheat contracts again had strong gains last week. The U.S. Department of Agriculture made a significant cut in projected ending stocks by increasing exports. Commercial buying and sharp losses in the U.S. dollar were supportive, as well. For the week, March Minneapolis gained 27 cents, March Chicago was up 22 cents and March Kansas City gained 27 cents.

By: Ray Grabanski, Agweek

Wheat

Wheat contracts again had strong gains last week. The U.S. Department of Agriculture made a significant cut in projected ending stocks by increasing exports. Commercial buying and sharp losses in the U.S. dollar were supportive, as well. For the week, March Minneapolis gained 27 cents, March Chicago was up 22 cents and March Kansas City gained 27 cents.

The wheat markets started with gains on Feb. 10, even before USDA released its monthly supply and demand report. In the report, USDA lowered ending stocks for wheat by 50 million bushels to 558 million, a reduction of more than 8 percent, and well below trade estimates. Ending stocks-to-use now stands at 22.7 percent, down from 25.3 percent last month. Most of the change came from a 50 million bushel hike in export projections, while a 10 million bushel increase in domestic use was offset by a 10 million bushel increase in imports. Global ending stocks had a small reduction, as well, declining by 1.67 million metric tons to 183.73 million metric tons.

Wheat continued to trade higher again Feb. 11 and finished with gains of 3 to 10 cents. Trade continued to be supported by commercial buying and noncommercial short-covering after the bullish USDA report. Outside markets were also supportive with losses in the dollar index. Traders are beginning to roll contracts into May and out of the explosive March futures. Basis remains strong in the Northern Plains, and producers should be prepared to take advantage.

Wheat markets traded on both sides of unchanged Feb. 12 before closing mixed. There were losses in all of the March contracts, while the May contracts performed somewhat better. The increasing inverse in nearby spreads is indicative of continued commercial buying. Minneapolis and Kansas City have strong inverses in the March to May spread.

The wheat markets continued to have steady gains the last two days of the week with continued commercial buying. Commercials are attempting to get the wheat out of farmers’ bins and elevators, but the winter weather and busy railroads are making it difficult.

USDA estimated wheat export inspections pace for the week ending Feb. 7 at 446,197 metric tons. This brings the year-to-date export shipments pace for wheat to 22.5 million metric tons, compared with 17 million metric tons at this time last year. Wheat export sales pace for the week ending Feb. 7 was estimated at 21.9 million bushels, above the 11.4 million needed to keep pace with USDA projections. This brings wheat’s export sales pace for the year to 1.0027 billion bushels, compared with 795.4 million last year. Shipments of 14.8 million bushels were below the 23.4 million needed to keep pace with projections.

Corn

The USDA report lowered domestic stocks even further than expected by traders, but the bullish report had little impact on the market, as quiet trade continued throughout the week. As of the Feb. 13 close, the March contract was down 3.25 cents for the week.

The corn market traded slightly higher Feb. 10 as traders expected to see a smaller ending stocks number in USDA’s report. The report confirmed what the trade was anticipating. USDA increased its export estimates for corn by 150 million bushels and ending stocks were lowered to 1.481 billion bushels, which was below the range of estimates. The stocks-to-use ratio declined from 12.4 percent to 11.1 percent. USDA also lowered global ending stocks for corn to 157.3 million metric tons, down from 160.23 million last month, which was a 2.93 million metric ton cut. For South America, USDA left Brazil’s production steady at 70 million metric tons, but lowered Argentina’s production by 1 million to 24 million. The news offered early support, but the futures worked lower into the afternoon.

The corn market traded slightly lower Feb. 11 and remained there into the close as the Feb. 10 poor close carried over. Additional weakness came from talk that end users know there is a large number of bushels still in the bin and the recent run has increased farmer selling. The corn market traded slightly lower again Feb. 12. Traders remained concerned over future cancellations of corn to China with the nonapproved GMO variety. The ethanol report came in below estimates and stocks increased, but there were no imports for the 19th week in a row. The corn market continues to struggle to find buying interest at the upper end of the recent range and the basis has been getting wider.

The corn market was narrowly mixed in low volume trade Feb. 12, with nearby contracts closing higher while the deferred finished with small losses. USDA released its 10-year baseline projections with corn acreage for 2014 and 2015 set at 93.5 million acres with a yield of 165.6 bushels per acre. The result would be production of 14.3 billion bushels. This report was bearish as expected, but many traders think both acreage and yield are overstated, while demand is understated by the report. The Feb. 13 export sales report was bullish, coming in well above the amount needed to keep pace with USDA’s projection.

Ethanol production for the week ending Feb. 7 averaged 902,000 barrels per day, up 0.78 percent from the previous week. Total ethanol production for the week was 6.31 million barrels. Corn used in production the week ending Feb. 7 is estimated at 94.71 million bushels and needs to average 97.27 million per week to meet this crop year’s USDA estimate of 5 billion bushels. This crop year’s cumulative corn used for ethanol production is 2.15 billion bushels. Stocks were 17.06 million barrels, up 1.93 percent from the previous week.

USDA’s export inspections report was bearish for corn at 27.4 million bushels versus the 29.2 million bushels needed to meet projections. USDA’s export sales were reported at 50 million bushels. This brings the year-to-date sales pace for corn to 1.362 billion bushels, compared with 547 million for last year. The shipments came in at 37.5 million bushels, above the 33.7 million needed to meet USDA’s estimate.

Soybeans

Soybeans defied all odds last week and pushed to new five-month highs. Expectations for heavy Chinese cancellations have yet to surface, and commercial buying continues. As of the Feb. 13 close, March soybeans were 12.75 cents higher for the week, while the November contract gained 12 cents.

Soybeans were trading higher early in the session Feb. 10 ahead of the USDA report. The report was not as friendly as many traders expected. USDA pegged U.S. ending stocks of soybeans at 150 million bushels, unchanged from last month and above the 143 million expected. World ending stocks were increased to 73 million metric tons, up from 72.3 million in January and above 72.65 million expected. Brazilian production increased to 90 million metric tons from 89 million last month while Argentinean production slipped to 54 million metric tons from 54.5 million in January.

Soybeans were under pressure early Feb. 11 before commercial buying into midday lifted the market to close with gains. Tight old-crop stocks and a drier forecast for Brazil provided support. Soybeans traded lower Feb. 12, as well, following cancellations of sales to China. The cancellations amounted to 272,000 metric tons of old-crop soybeans. A sale of 240,000 metric tons of new-crop soybeans to China was also announced.

Tight old-crop domestic soybean supplies continue to support the market, as the March contract closed at the highest level in five months on Feb. 13. South American weather remains somewhat supportive with dry weather expected to return this week after moderate rainfall over the weekend. USDA released its 10-year baseline projections for 2014 and 2015 on Feb. 13, with soybean acreage coming in at 78 million. Combined with projected yield of 45.2 bushels per acre, this would result in production of 3.48 billion bushels. Feb. 13 export sales were lighter because of the Chinese New Year holiday, but still are seen as bullish since this year’s export sales have already surpassed USDA’s projection.

USDA reported soybean export inspections pace for the week ending Feb. 7 at 57 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.216 billion bushels, compared with 1.037 billion for last year at this time. Soybean export sales pace was estimated at 6.4 million bushels. This brings soybean’s export sales pace for the year to 1.587 billion bushels, compared with 1.25 billion last year. With 29 weeks left in soybean’s export marketing year, sales are above USDA’s projection of 1.51 billion bushels.

Barley

USDA estimated barley export inspections pace for the week ending Feb. 7 at 68,000 bushels. This brings barley’s export shipments pace to 6.445 million bushels, compared with 5.603 million last year. Barley export sales pace was estimated at 6,000 metric tons. For the week ending Feb. 13, cash feed barley bids in Minneapolis were unchanged at $3.70 per bushel, while malting barley was unchanged at $5.65.

Durum

There were no export inspections or export sales reported for durum the week ending Feb. 7. As of the Feb. 13 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 was unchanged at $6.80.

Canola

As of the Feb. 13 close, March canola futures on the Winnipeg, Manitoba, exchange were $27 (Canadian) lower on the week at $394. Canola futures were sharply lower throughout the week, as increased speculative selling led to a handful of new sets of contract lows. Logistic issues with moving Canada’s record-large crop continue to weigh on the market. Gains in Chicago Board of Trade soyoil futures provided some support. As of the Feb. 13 close, cash canola bids in Velva, N.D., were 99 cents lower on the week at $16.46 per hundredweight.

Sunflowers

Soybean oil export sales pace for the week ending Feb. 7 was estimated at 53.3 thousand metric tons. This brings the year-to-date export sales pace for soybean oil to 519.2 thousand metric tons, compared with 765.4 thousand metric tons for last year. As of the Feb. 13 close, July soybean oil was up 98 cents for the week at $39.54 per hundredweight. Cash sunflower bids in Fargo, N.D., were 25 cents higher for the week at $19.65 per hundredweight.

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