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Published March 24, 2014, 09:33 AM

Dust storms make wheat the leader

Wheat had gains last week as focus returned to dry conditions on the Southern Plains with dust storms reported. Reports of winterkill also spurred a rally led by the Kansas City wheat market. Profit taking at the end of the week trimmed the gains. As of midday on March 21, May Minneapolis had gained 14 cents on the week, May Chicago was up 8 cents and May Kansas City gained 22 cents.

By: Ray Grabanski, Agweek

Wheat

Wheat had gains last week as focus returned to dry conditions on the Southern Plains with dust storms reported. Reports of winterkill also spurred a rally led by the Kansas City wheat market. Profit taking at the end of the week trimmed the gains. As of midday on March 21, May Minneapolis had gained 14 cents on the week, May Chicago was up 8 cents and May Kansas City gained 22 cents.

Wheat traded lower on March 17, as tensions eased in Ukraine. Russia and Ukraine called a truce until March 21, as both sides digest the recent events in Crimea. The truce has allowed for exports out of the Ukraine to continue without disruption and that now has traders looking to remove some of the risk premium they built into the market. Losses were kept in check by the thought that winter wheat crop condition rating would continue to decline.

The wheat markets turned sharply higher March 18 as attention has returned to weather in the U.S. Crop condition ratings dropped again last week for Texas, Oklahoma and Kansas, and the forecast remains mostly dry for the western hard wheat belt. Kansas reported its crop at 34 percent good to excellent, 46 percent fair and 20 percent poor or very poor, 3 percent lower than the previous week. Oklahoma rated its winter wheat crop at 18 percent good to excellent, 45 percent fair and 37 percent poor or very poor, 4 percent lower than the previous week. Texas crop was rated 13 percent good to excellent, 35 percent fair and 52 percent poor or very poor, 15 percent off the previous week’s rating. The Kansas City market made new eight-month highs.

The wheat markets started the day March 19 with light gains, but quickly surged higher. The sudden move higher was indicative of new export business, and weather concerns kept the gains strong throughout the day. Dust storms in Oklahoma and Texas March 18 reminded traders of the dry conditions there, with little relief in sight. There are some forecasts for rain and snow more than a week out, but precipitation amounts are variable.

The wheat markets started March 20 with light gains, but slipped lower during the day as buying interest ran out and some light profit taking took place. Sharp gains in the U.S. dollar pressured wheat. Traders were also taking some risk premium out of the market following remarks by both President Obama and Chancellor Merkel. The leaders of the U.S. and Germany indicated no further sanctions were likely against Russia unless they take further action against Ukraine. Ukrainian military forces are in the process of pulling out of the Crimean peninsula. Market losses continued on March 21 as traders took profits after an active week.

The U.S. Department of Agriculture reported wheat export inspections pace for the week ending March 14 at 18.2 million bushels. This brings the year-to-date export shipments pace for wheat to 911.9 million bushels, compared with 741.1 million for last year at this time. Wheat export sales pace was estimated at 14.8 million bushels, above the 8.8 million needed to keep pace with projections. Shipments of 16.2 million bushels were below the 26 million needed.

Corn

Corn remained range bound last week with mixed news. Support came from big gains in wheat in the first half of the week. Traders are also expecting fewer corn acres compared with 2013 in the end of the month report from USDA. The upside was limited with slower buying interest as the futures trade at the top of the recent range. The unrest in the Ukraine also quieted down last week. As of midday on March 21, the May contract was down 10 cents for the week, while the December contract lost 9 cents.

The corn market traded lower overnight on March 16 and remained there on Match 17. The previous week, we saw support come from the unrest in the Ukraine, and, to start last week, some of those profits were taken as the Crimean vote played out as expected. Taiwan also had a tender for a cargo of corn but did not purchase because prices were too high.

The futures bounced higher with turnaround March 18 and carried over to March 19. Buying interest surfaced as the wheat market traded sharply higher and spilled over to the corn. The winter wheat conditions continue to decline with drought conditions and dust storms in the southwest states. There was also a fresh export sale announced to Mexico and South Korea. Traders are looking at the weather forecast that remains cool into April and could delay corn planting. Corn is also finding additional support from strength in the ethanol market that continues to trend higher and last week’s report showed an increase in corn usage.

Profit taking came into the market on March 20. There was also talk that China might only import 3 million metric tons of corn this year versus USDA’s estimate of 5 million because of the unapproved GMO variety. The corn market is struggling to create buying interest as it trades at the upper end of its range.

Ethanol production for the week ending March 14 averaged 891,000 barrels per day, up 2.53 percent from the previous week. Total ethanol production for the week was 6.237 million barrels. Corn used in production the week ending March 14 is estimated at 93.56 million bushels and needs to average 98.01 million bushels per week to meet this crop year’s USDA estimate of 5 billion bushels. Stocks were 15.277 million barrels, down 3.97 percent from the previous week.

USDA’s export inspections report was bullish for corn at 38.5 million bushels versus the 35.2 million needed to keep pace with USDA projections. Corn export sales were estimated at 29.4 million bushels, which was well above the 4.8 million needed to stay on pace with USDA’s estimate of 1.625 billion. The shipments came in at 36.5 million bushels, above the 34.7 million needed to keep pace with USDA projections.

Soybeans

Old-crop soybeans traded up near the $14.60 level again last week, but failed to break through, dropping the last two days of the week. As of midday March 21, May soybeans were still 19 cents higher for the week, while the November contract gained just 2 cents.

Soybeans were lower in overnight trade March 16, but bounced back following strong export inspections numbers the morning of March 17. Good demand for tight old crop continues to provide support. The Brazilian harvest is now 59 percent complete with a stronger shipping pace likely in the near term. National Oilseed Processors Association crush numbers were released March 17, with 141.6 million bushels of soybeans being crushed in February. This was more than expected, but still behind the 156.9 million bushels crushed in January. March 17 export inspections were bullish, coming in well above the amount needed to keep pace with USDA’s projection.

The soybean market closed higher on March 18 and 19, as commercial buying of tight old-crop soybeans continued to provide support. Additional support came from strength in soybean oil and soybean meal contracts following solid NOPA crush demand numbers. China’s demand for U.S. soybeans has been very strong, but could move to South American beans as the harvest continues there, with Brazil nearing two-thirds complete and Argentina beginning to get under way.

Soybeans traded lower throughout the day March 20 and into March 21, despite another round of supportive export sales numbers. Export sales and shipments are now 7 percent ahead of USDA’s estimate for the year. On March 20, Informa suggested the U.S. is likely to import several cargoes of soybeans from South America this summer. Old-crop supplies remain very tight, but concerns about China’s future demand pressure the market. USDA announced a sale of 120,000 metric tons of new-crop soybeans to China on March 20.

USDA reported soybean export inspections pace for the week ending March 14 at 34.5 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.43 billion bushels, compared with 1.174 billion for last year at this time. Soybean export sales pace for the week ending March 14 was estimated at 23.5 million bushels (7.4 million for 2013 to ’14). Soybean export sales remain above USDA’s demand projection of 1.53 billion bushels. Shipments were reported at 41.1 million bushels.

Barley

USDA reported export inspections pace for the week ending March 14 at 0.579 million bushels. Barley export sales pace was estimated at 0.587 million bushels. For the week ending March 20, cash feed barley bids in Minneapolis were unchanged at $3.90 per bushel, while malting barley was unchanged at $6.

Durum

There were no export inspections or sales reported for durum the week ending March 14. As of the March 20 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 20 close, May canola futures on the Winnipeg, Manitoba, exchange were $5.40 (Canadian) lower on the week at $455.20 (Canadian). Canola futures traded higher early in the week as traders continue to see canola as undervalued compared with other oilseeds. Speculative buying and strength in Chicago Board of Trade soybean futures provided support. The market closed sharply lower on March 20 as speculators took profits amid farmer selling. As of the March 20 close, cash canola bids in Velva, N.D., were 16 cents lower on the week at $19.12 per hudredweight.

Sunflowers

Soybean oil export sales pace for the week ending March 14 was estimated at 2,000 metric tons. As of the March 20 close, May soybean oil was down 98 cents for the week at $41.31. Cash sunflower bids in Fargo, N.D., were 5 cents lower for the week at $20.45 per hundredweight.

Dry beans

Market activity has been extremely quiet this winter, with processing and shipping efforts hampered by cold weather and transportation logistics. Old-crop navy beans are steady at $37, while pintos remain off the board. There are rumors of new crop contracts being offered for pintos sometime before planting, probably in the upper $20 range.

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