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Published March 10, 2014, 10:16 AM

Rally fueled by tensions in Ukraine

Wheat had big gains last week as the Ukrainian situation has made traders nervous. As of the midday on March 7, May Minneapols had gained 43 cents on the week, May Chicago was up 49 cents and May Kansas City gained 45 cents.

By: Ray Grabanski, Agweek

Wheat

Wheat had big gains last week as the Ukrainian situation has made traders nervous. As of the midday on March 7, May Minneapols had gained 43 cents on the week, May Chicago was up 49 cents and May Kansas City gained 45 cents.

Wheat markets opened sharply higher March 3 and traded with strength for the day. Rising tensions between the U.S. and Russia regarding the Ukrainian situation created gains in the grain markets, especially wheat. Buyers were active, wanting to be owners of grain futures in anticipation of disruptions in exports from the Black Sea region. Exports of wheat were expected to rise this year for both Ukraine and Russia, but traders took positions to prepare for the opposite.

Wheat markets opened with light losses March 4 after Russian troops were ordered back to their bases near Ukraine, but buying interest quickly came back into the market, viewing the setback as a buying opportunity. Focus also returned to the deteriorating conditions of the U.S. winter wheat crop on the southern plains, with the March 3 monthly update showing another decline in conditions ratings.

The wheat markets experienced quieter trade March 5 and 6 as the Ukraine situation has turned into more of a drawn out diplomatic situation. The European Union announced $15 billion in aid to Ukraine, and there are no reports of issues at Black Sea ports. Traders are now waiting to see what the U.S. crop will look like as it comes out of dormancy. Last week’s export report was viewed as bullish, with strong sales even as wheat prices have risen.

March 7 trade brought solid gains again in the wheat markets as traders were nervous about being short this market over the weekend, given the high tension in Ukraine. May Chicago wheat was able to hold above support at the 100-day moving average at $6.42, with the next major resistance at $6.65.

The National Agricultural Statistics Service monthly crop condition reports showed Texas winter wheat at 15 percent good to excellent, down from 18 percent last month. The Oklahoma crop is rated 31 percent good to excellent versus 36 percent last month, with Kansas at 34 percent good to excellent versus 35 percent last month.

U.S. Department of Agriculture reported export inspections pace for the week ending Feb. 28 at 22.4 million bushels. This brings the year-to-date export shipments pace for wheat to 23.93 million metric tons, compared with 18.86 million for last year at this time. Wheat export sales pace was estimated at 20.4 million bushels, above the 10.2 million needed to keep pace with projections. This brings wheat’s export sales pace for the year to 1.052 billion bushels, compared with 857.5 million last year. Shipments of 23.3 million bushels were below the 25.2 million needed.

Corn

Buying interest resurfaced to start the week in the corn market and pushed the futures to six-month highs. Early support in the week came from unrest in Ukraine over the weekend and smaller production estimates in South America. The market remained firm into the end of the week as traders look ahead to the March 10 USDA report. As of midday on March 7, the May contract was up 19 cents for the week, while the December contract gained 15 cents.

The corn market traded with decent gains on March 3 and 4, driven by the strength in the wheat complex and the issues in Ukraine. The unrest in Ukraine created fund buying as traders think their exports might be affected and demand could switch to the U.S. The export inspections were friendly on March 3. There was also talk that the Environmental Protection Agency might not make any changes to the Renewable Fuels Standard. Smaller estimates have been surfacing for South America and a private firm released its estimate for corn production and lowered it to 65.5 million metric tons, compared with last month’s estimate of 66.6 million metric tons. There are also some forecasts looking for a cool spring and U.S. snowpack is the third-largest on record, which could delay planting.

The corn market lost some ground on March 5 with profit taking after the 10-cent gains on March 4. The ethanol report was also disappointing and below estimates. Buying interest came back into the trade on March 6 and 7. The futures traded to six-month highs in the old-crop contracts with a lower dollar and a good export sales report on March 6. The world stocks are also expected to be down by 1 million metric tons to 156.3 million in the March 10 report because of slight decreases in South American production.

Ethanol production for the week ending Feb. 28 averaged 894,000 barrels per day, down 1.22 percent from the previous week. Total ethanol production for the week was 6.25 million barrels. Corn used in production the week ending Feb. 28 is estimated at 93.87 million bushels and needs to average 97.57 million bushels per week to meet this crop year’s USDA estimate of 5 billion bushels. Stocks were 16.61 million barrels, down 2.43 percent from the previous week.

USDA’s export inspections report was bullish for corn at 41.1 million bushels versus the 34.6 million needed to keep pace with USDA projections. Corn export sales were estimated at 66.8 million bushels, which was well above the 6.2 million needed to stay on pace with USDA’s estimate of 1.6 billion. The shipments came in at 45.2 million bushels, above the 34.1 million needed to keep pace with USDA projections.

Soybeans

While the soybean market was largely unaffected by the situation in Ukraine, focus continues to be on tight supplies of old-crop soybeans in the U.S. Traders are closely watching harvest progress in South America. As of the March 6 close, May soybeans were 24 cents higher for the week, while the November contract gained 16.75 cents.

Soybeans opened the week higher with spillover support from corn and wheat, but commercial selling into the close led to moderate losses on March 3. March 4 saw strong gains tied to commercial buying in soyoil futures. Brazil’s harvest continued to move along despite some moisture issues in the northern part of the country. Production estimates are now thought to be around 85 million to 88 million metric tons, compared with USDA’s February estimate of 90 million. March 3 export inspections were bullish, coming in well above the amount needed to keep pace with USDA’s projection.

Soybean trade was mostly lower March 5, following an announcement that China had cancelled 245,000 metric tons of old-crop soybeans. The cancellation placed limited pressure on the market as USDA’s export estimate anticipated some cancellations. Expectations were for the Brazilian harvest to approach 50 percent complete by the end of last week and for shipments from South America to begin to pick up the pace, as well.

Soybeans traded higher March 6 with strength tied to sharp gains in soyoil futures. Another round of bullish export sales provided additional support with the total export sales now at 1.623 billion bushels, well above the 1.51 billion projected by USDA for the year. The outside markets were supportive with gains in crude oil and sharp losses in the U.S. dollar. Traders are beginning to position ahead of the next USDA World Agricultural Supply and Demand report due out March 10.

USDA reported soybean export inspections pace for the week ending Feb. 28 at 36.2 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.355 billion bushels, compared with 1.146 billion for last year at this time. Soybean export sales pace for the week ending Feb. 28 was estimated at 28.4 million bushels. This brings soybean’s export sales pace for the year to 1.623 billion, compared with 1.278 billion last year. With 26 weeks left in soybean’s export marketing year, sales are above USDA’s projection of 1.51 billion bushels.

Barley

There were no export sales or inspections reported for barley for the week ending Feb. 28. For the week ending March 6, cash feed barley bids in Minneapolis were unchanged at $3.70 per bushel, while malting barley increased to $6.

Durum

USDA estimated durum export inspections pace for the week ending Feb. 28 at 59,308 metric tons. There were no export sales reported. As of the March 6 close, cash bids for milling quality durum were at $7 per bushel in Berthold, N.D., while the Dickinson, N.D., bid was at $7.15.

Canola

As of the March 6 close, March canola futures on the Winnipeg, Manitoba, exchange were $27.30 (Canadian) higher on the week at $457.20 (Canadian). Canola futures were sharply higher throughout the week on concerns that political problems could slow exports out of the Ukraine and Russia. Strong Chicago Board of Trade soybean and soyoil futures provided additional support while logistical problems continue to limit the upside. As of the March 6 close, cash canola bids in Velva, N.D., were 95 cents higher on the week at $19.14 per hundredweight.

Sunflowers

Soybean oil export sales pace for the week ending Feb. 28 was estimated at 16.9 thousand metric tons. This brings the year-to-date export sales pace for soybean oil to 549.5 thousand metric tons, compared with 779.4 thousand metric tons for last year. As of the March 6 close, May soybean oil was up $2.70 for the week at $44.49 per hundredweight. Cash sunflower bids in Fargo, N.D., were 75 cents higher for the week at $20.95 per hundredweight.

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