Potential production pressuresWheat lost ground in every session last week. Selling was tied to improving weather conditions in the plains, as well as from position squaring ahead of the July 11 U.S. Department of Agriculture reports.
By: Ray Grabanski, Agweek
Wheat lost ground in every session last week. Selling was tied to improving weather conditions in the plains, as well as from position squaring ahead of the July 11 U.S. Department of Agriculture reports. For the week ending July 10, September Minneapolis dropped 31.5 cents, September Chicago declined 31 cents, and September Kansas City slipped 40 cents.
Wheat started the week off on a bad foot, as all three of the wheat exchanges traded with sharp losses. Chicago’s losses were enough to push this exchange to a new contract low. Selling pressure is from the lack of any production threat. Warm dry conditions are taking over in the U.S., allowing for harvest progress to move forward in the Southern Plains, and it is also allowing the soggy fields in the north a chance to dry out. Additional selling spilled over from a sloppy session in the corn and soybean complex.
The rest of the week had wheat on the ropes, as well, but not with as much intensity as July 7. Improving weather conditions in the plains, along with position squaring ahead of the July 11 USDA report, pressured the market. The report should be neutral to old-crop wheat, as the quarterly grain stocks estimate showed less wheat stocks than export (8 million bushels fewer). But the acreage estimate put wheat acres about 600,000 more than expected and that will increase 2014 ending stocks, which the trade believes to be negative.
Less than stellar export demand added to wheat’s losses. This was evident in the July 10 bearish USDA export sales estimate, as well as from news that Egypt bought 240,000 metric tons of Romania wheat. U.S. lost out on a few other export sales last week and that has many traders expecting USDA to decrease wheat’s export pace. Seasonally, wheat is due for a post-harvest rally and technically wheat is due to correct an oversold market condition, but reality is keeping both from happening.
As of July 6, 47 percent of the nation’s spring wheat crop was headed, compared with 26 percent the previous week and 47 percent for the five-year average. Spring wheat conditions were estimated at 70 percent good to excellent, 24 percent fair and 6 percent poor or very poor, unchanged from the previous week. Winter wheat harvest was estimated at 57 percent complete, compared with 43 percent the previous week and 60 percent for the five-year average. Winter wheat crop conditions increased 1 percent to 31 percent good to excellent, 25 percent fair and 44 percent poor or very poor.
The corn futures lost more ground last week and traded to a four-year low. The funds remain active sellers with ideal weather and good crop condition ratings. Buying interest remains sidelined with the lack of fresh news and no change to the weather forecast, along with a large production estimate. As of the July 10 close, the July contract was down 16.5 cents for the week, while the December contract lost 22.5 cents and traded to a new contract low at $3.9275. July 11, ahead of the report, the July contract was trading 2 cents lower, while the December contract was 3.5 cents lower.
The corn futures opened sharply lower on July 7 and remained there for the day. The weather forecast is near ideal for the next two weeks. The funds were also active sellers and the export inspections came in below USDA’s estimate. Selling pressure continued on July 8 and 9, pushing the December contract below $4. The crop condition ratings remained even with the previous week, but this year’s crop is now rated higher than the 2004 and 2010 crops that produced record yields. Traders were also looking ahead to the July 11 report and expectations were that USDA will raise the stocks and yield numbers. Last week’s ethanol report was disappointing and showed corn use down from the previous week and stocks grew. CONAB also raised its production estimate for Brazil’s corn to 78.2 million metric tons, versus 77.9 million last month and above USDA at 76 million metric tons.
Corn futures closed lower the afternoon of July 10, after showing gains overnight. The December contract set another new low, as traders continued to position ahead of the July 11 World Agricultural Supply & Demand report that was expected to be bearish. Expectations were for new crop ending stocks of 1.774 billion bushels, compared with 1.726 billion in June. World carryover is expected to be 184.53 million metric tons, up from 182.65 million metric tons in June. The weather remains favorable for corn pollination with extreme heat absent from the forecast. July 10 export sales were above the amount needed to keep pace with USDA’s projection.
As of the July 10 close, August soybeans were 67 cents lower for the week, while the November contract lost 40.5 cents. At 10 a.m., July 11, August soybeans were trading 3 cents lower, while November was down 5 cents.
Soybeans traded lower for the sixth consecutive day July 7, as prices continued to adjust to the previous week’s bearish acreage numbers. In addition to record planting acreage, the July 7 crop progress report showed soybeans are doing well with emergence and blooming ahead of their respective five-year averages and conditions remaining unchanged from the previous week. The forecast remains favorable for crop development, as well. An announced sale of 347,000 metric tons of new-crop soybeans to China did help limit the losses somewhat.
Soybeans traded lower again July 8, as follow-through selling continued with prices seen as still too high for the bearish fundamental outlook following June 30 record acreage expectations. Long liquidation continued July 9, leading to a lower close in soybeans for the eighth consecutive day. Mild summer weather remains a negative factor for the market, though the most important weather period for the soybean crop will come in late July and August.
Soybean trade closed lower July 10, giving back gains from the overnight session. The July 11 report should be bearish with new crop ending stocks expected to be at 418 million bushels, compared with 325 million in June. World ending stocks are projected to be 84.79 million metric tons, up from 82.9 million in June’s report. On July 10, USDA reported a sale of 60,000 metric tons of soybeans to unknown destinations for 2013 and 2014 delivery. USDA also reported sales of 66,000 metric tons to unknown locations and 118,000 metric tons to China for 2014 and 2015 delivery.
Soybean emergence was at 98 percent, compared with 94 percent the previous week and the five-year average of 97 percent. Soybeans blooming were at 24 percent, compared with 10 percent the previous week and the five-year average of 21 percent. Conditions for soybeans were rated at 72 percent good to excellent, 23 percent fair and 5 percent poor or very poor.
As of July 6, 61 percent of the nation’s barley was headed, compared with 31 percent the previous week and 44 percent for the five-year average. Barley crop conditions were unchanged at 68 percent good to excellent, 29 percent fair and 3 percent poor or very poor.
July 10 cash feed barley bids in Minneapolis were at $3.15 per bushel, while malting bids were $5.65.
As of July 6, 9 percent of North Dakota’s durum crop was headed, compared with zero the previous week and 26 percent for the five-year average. North Dakota’s durum crop condition rating was estimated at 87 percent good to excellent, 12 percent fair and 1 percent poor, a 1 percent increase from the previous week.
July 10 cash bids for milling quality durum were at $8.80 per bushel in Berthold, N.D., while the Dickinson, N.D., bid was at $8.70.
Canola futures on the Winnipeg, Manitoba, exchange closed the week ending July 10 $8 (Canadian) lower. Canola started the week higher because of commercial buying. Commercial firms were trying to secure product because of concerns that this year’s production could be less than expected, as a result of this spring’s heavy rains. By mid-week, canola came under pressure from spillover selling from a sharply lower U.S. soybean market.
As of July 6, North Dakota canola was 63 percent in bloom, compared with 27 percent the previous week and 48 percent for the five-year average. Canola’s crop condition rating was estimated at 83 percent good to excellent, 16 percent fair and 1 percent poor, 2 percent better than the previous week.
July 10 old-crop cash canola bids in Velva, N.D., were at $19.42 per hundredweight, while new-crop bids were $18.23 per hundredweight.
Dry edible beans
As of July 6, North Dakota’s dry bean crop (40 percent of the nation’s crop) was 8 percent in bloom, compared with 4 percent the previous week and 10 percent for the five-year average. North Dakota’s crop was rated 71 percent good to excellent, 22 percent fair and 7 percent poor or very poor, 1 percent less than the previous week. Minnesota’s crop (7 percent of nation’s crop) was rated 50 percent good to excellent, 38 percent fair and 12 percent poor or very poor.
As of July 6, 98 percent of the nation’s sunflower crop had been planted, compared with 91 percent the previous week and 97 percent for the five-year average.
July 10 old-crop cash sunflower bids in Fargo, N.D., were at $20.60 per hundredweight, while new-crop sunflower bids were $20.20 per hundredweight.