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Published May 12, 2014, 10:11 AM

Weather concerns drive market

Wheat started last week with large gains from weather concerns, but slowed down toward the end of the week with position squaring ahead of the U.S. Department of Agriculture’s May crop production report the main feature.

By: Ray Grabanski, Agweek

Wheat

Wheat started last week with large gains from weather concerns, but slowed down toward the end of the week with position squaring ahead of the U.S. Department of Agriculture’s May crop production report the main feature. For the week ending May 8, July Minneapolis gained 30.75 cents, September Minneapolis increased 30.25 cents, July Chicago gained 19.25 cents and July Kansas City increased by 20.75 cents. USDA’s May crop production report was friendly for wheat as it estimated all wheat ending stocks at 540 million, compared with the average trade guess of 550 million.

The May 5 and 6 sessions brought strong gains to all three of the wheat exchanges. Weather again took center stage as drought and heat continued in the Southern Plains. Additional support came from slow planting progress in the Northern Plains. Continued concerns about the Ukraine-Russian conflict added buying strength. Gains were kept in check by Statistics Canada’s March 31 stocks report, which put all wheat stocks in Canada at levels not seen in more than 20 years. Statistics Canada estimated Canada’s wheat stocks at 21.25 million metric tons, 47 percent higher than last year at this time.

Wheat continued its bull run as traders continue to price in a weather premium. Hot, dry weather in the Southern Plains, which has severely hurt the potential yield for hard red winter wheat (which accounts for about two-thirds of the U.S. wheat supply), continues to give traders confidence to buy wheat. Additional support is coming from planting concerns in the Northern Plains, as cold, wet conditions slow planting progress in North Dakota and Minnesota. So far, those two states are running about equal to their pace last year, but dramatically less than the five-year average pace. Light support was from position squaring ahead of the USDA crop production report.

May 7 and 8 sessions brought cooler heads to the wheat exchanges, as the market took a breather from its impressive rally. After trading to 13-month highs, technical selling pressure stepped in to pull wheat off of its highs. Forecasts of rain and cooler temps, added to the pressure. Light selling was also tied to reports that Putin has agreed to pull troops off the border ahead of the May 25 election.

USDA estimated wheat export shipments pace for the week ending May 2 at 19.8 million bushels. Wheat export sales pace was estimated at 16.4 million bushels, with 11.8 million being old crop and 4.6 million being new crop. With four weeks left in wheat’s export marketing year, shipments will need to average 28.8 million bushels and sales need to average 3.8 million to make USDA’s expectations of 1.175 billion.

As of May 4, 26 percent of the nation’s spring wheat crop had been planted, compared with 18 percent the previous week and 41 percent for the five-year average. Spring wheat emergence was estimated at 7 percent, compared with 5 percent the previous week and 17 percent for the five-year average. Twenty-nine percent of the nation’s winter wheat crop was headed, compared with 18 percent the previous week and 35 percent for the five-year average. Winter wheat crop conditions declined 2 percent and is now rated 31 percent good to excellent, 31 percent fair and 38 percent poor to very poor.

Corn

The corn market firmed up early last week with slow planting progress being reported in the May 5 USDA report. Export sales have also been good, but news of cancellations slowed buying interest late in the week. Traders were also looking ahead to USDA’s World Agricultural Supply and Demand report, released on May 9. As of the May 8 close, the July contract was up 17.25 cents for the week, while the December contract gained 17.5 cents. Shortly after the WASDE report was released corn was trading with 5-cent losses in July and 8-cent losses in December.

Corn traded with decent gains on May 5 and 6. Early support in the week came from the double-digit gains in the wheat futures and unrest in the Ukraine over the weekend, with conflict in the port of Odessa. The planting progress report also came in at the low end of estimates and 13 percent below the five-year average, with 29 percent of the corn planted as of May 4. The weather forecast is being closely watched and calls for widespread rain to end the week sending planters back to the shed.

Buying interest in the corn market slowed on May 7 and closed slightly lower and near unchanged on May 8. Traders were looking ahead to the May 9 USDA report. Expectations are for a slight drop in stocks to 1.314 billion bushels versus 1.331 billion last month, while 2014 production is being estimated at 13.925 billion and a stocks estimate of 1.672 billion bushels. The ethanol report also showed a drop in corn usage for the third week in a row and there was an announcement of 220,000 metric tons of corn export cancellations. Talk of rapid planting through the Corn Belt last week added additional weakness.

In the May WASDE report, USDA lowered old-crop corn ending stocks to 1.146 billion bushels from 1.331 billion in April. New-crop production was pegged at 13.935 billion bushels, with a carryover estimate of 1.726 billion. Globally, old crop ending stocks for corn were increased to 168.42 million metric tons from 158 million in April, while new crop was estimated at 181.73 million metric tons.

Ethanol production for the week ending May 7 averaged 894,000 barrels per day, down 0.45 percent from the previous week. Total ethanol production for the week was 6.258 million barrels. Corn used in production the week ending May 2 is estimated at 93.87 million bushels and needs to average 99.153 million bushels per week to meet this crop year’s USDA estimate of 5 billion bushels. Stocks were 17.14 million barrels, down 0.42 percent from the previous week.

The crop progress report showed 29 percent of the corn is planted versus 11 percent one year ago and a five-year average of 42 percent. Emergence is at 7 percent versus 3 percent one year ago and a five-year average of 13 percent.

Soybeans

As of the May 8 close, July soybeans were 1.25 cents lower for the week, while the November contract gained 1.5 cents. Ten minutes after the release of USDA’s WASDE report, July soybeans were trading 2 cents lower and the November contract was down 2.5 cents.

Soybean trade was quiet May 5 on the way to moderate losses in nearby contracts and small gains in the deferred. Commercial selling pressured the old crop, while tight supplies continued to provide underlying support. As Chinese demand has slowed, so have exports, with May 5 inspections light, but still just above the amount needed to keep pace with USDA’s projection. The new-crop November contract remains strong as it continues to ignore expectations for record high plantings.

Soybeans traded lower on May 6 and 7 amid commercial selling as the July to November spread continued to unwind, slipping to 55 cents off the high of $2.80. Old-crop soybean supplies remain tight, but trade is expecting additional South American cargoes to be diverted to the U.S., as well as the possibility of further cancellations from China. Planting weather was favorable this week for much of the Midwest, but some concern remains that corn planting delays in the northern states could result in more soybean acres, adding to planting acreage that is already expected to be record high.

Soybean trade was higher May 8 with commercial buying returning as the market hit its lowest levels in five weeks and traders positioned ahead of the WASDE report. May 8 export sales and shipments were decent. Shipments have now reached 98 percent of USDA’s projection, while sales still rest 4 percent above USDA’s estimate. USDA also announced a sale of 140,000 metric tons of new-crop soybeans.

Old-crop soybean ending stocks were lowered to 130 million in the WASDE report from 135 million in April. New-crop production was estimated at a record 3.635 billion bushels, with an ending stocks estimate of 330 million. World ending stocks for old crop were lowered to 66.98 million metric tons from 69.42 million last month, while new crop was estimated at 82.23 million metric tons.

Planting progress as of May 4 had 5 percent of the U.S. soybean crop planted, compared with 3 percent the previous week and the five-year average of 11 percent.

Barley

As of May 4, 46 percent of the nation’s barley had been planted, compared with 33 percent the previous week and 44 percent for the five-year average. Barley emergence was estimated at 17 percent, compared with 11 percent the previous week and 16 percent for the five-year average.

Statistics Canada’s March 31 stocks estimate was negative for barley, as it put Canada’s stocks at 4.4 million metric tons, an increase of 43 percent from last year.

May 8 cash feed barley bids in Minneapolis were at $4 per bushel, while malting barley bids were at $6.

Durum

As of May 4, 1 percent of North Dakota’s durum crop was planted, compared with zero the previous week and 14 percent for the five-year average.

Statistics Canada’s March 31 production estimate was bearish for durum, estimating ending stocks at 3.9 million metric tons, a 32 percent increase from last year.

May 8 cash bids for milling quality durum were at $7 per bushel in Berthold, N.D., while the Dickinson, N.D., bid was $7.25.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending May 8 with 50-cent losses. Canola started the week off under pressure from a bearish Statistics Canada March 31 stocks estimate, which estimated canola stocks at an all-time high. Canola was able to recover late in the week with support spilling over from a higher U.S. soybean complex, as well as from strong commercial buying from end users. Late planting concerns added support.

Statistics Canada’s March 31 stocks report was bearish for canola. Canada’s canola stocks were estimated at a bearish 9.02 million metric tons, a 99 percent increase from last year.

As of May 4, North Dakota producers had 1 percent of the state’s canola planted, compared with zero the previous week and 13 percent for the five-year average.

May 8 cash canola bids in Velva, N.D., were at $21.05 per hundredweight.

Sunflowers

Statistics Canada’s March 31 stocks estimate was friendly to sunflowers. Sunflower stocks were estimated at 25 thousand metric tons, 53 percent less than last year.

USDA estimated soybean oil export pace for the week ending May 2 at 7.7 thousand metric tons. This brings soybean oil export sales pace to 591.7 thousand metric tons, compared with 832.7 thousand metric tons for last year.

May 8 cash sunflower bids in Fargo, N.D., were at $21.35 per hundredweight.

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