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Published August 18, 2014, 10:40 AM

USDA report pressures markets

Wheat struggled last week as traders positioned themselves ahead of the U.S. Department of Agriculture’s August crop production report. Improving fundamentals added pressure. For the week ending Aug. 14, September Minneapolis lost 13 cents, September Chicago dropped 12 cents and September Kansas City gave back 21 cents.

By: Ray Grabanski, Agweek

Wheat

Wheat struggled last week as traders positioned themselves ahead of the U.S. Department of Agriculture’s August crop production report. Improving fundamentals added pressure. For the week ending Aug. 14, September Minneapolis lost 13 cents, September Chicago dropped 12 cents and September Kansas City gave back 21 cents.

Wheat started last week on the defense. The first three sessions of the week had wheat trading with losses. Wheat started the week with gains. But wheat could not hold its gains as better than expected weekend rains in the Southern Plains pressured wheat. The recent rain showers should help improve the fall seeded winter wheat crop. Additional selling was tied to drier weather for Europe.

The Aug. 12 session saw selling pressure from USDA’s August crop production report. Overall, the U.S. estimates were neutral wheat as production and 2014 ending stocks estimates were right in line with traders’ estimates (production was at 2.03 billion bushels, compared with expectations of 2.01 billion bushels and July’s estimate of 1.99 billion bushels while ending stocks were at 663 million bushels, right at traders’ expectations and slightly higher than July’s 660 million bushels).

The bearishness in wheat’s estimates came from the world numbers. World ending stocks were at 192.96 million metric tons, compared with expectations of 189.89 million metric tons and 189.54 million metric tons in July. World production increases were seen in the U.S. (1 million metric tons), Ukraine (1 million metric tons) and Russia (6 million metric tons). The adjustments USDA made to the U.S. number was a 0.8 bushels increase in yield, which increased wheat supply 38 million bushels. This was slightly offset by a 10 million bushel increase in feed demand and a 25 million bushel increase in exports.

As of Aug. 10, 6 percent of the nation’s spring wheat crop was harvested compared with zero the previous week and 21 percent for the five-year average. Spring wheat conditions were estimated at 70 percent good to excellent, 25 percent fair and 5 percent poor to very poor, unchanged from the previous week. Winter wheat harvest was estimated at 95 percent complete, compared with 90 percent the previous week and 90 percent for the five-year average.

Corn

The corn market was looking forward to the Aug. 5 USDA report and expectations were that it would be bearish. USDA did raise its yield and production estimates from last month, but the yield was not as high as the average trade guess and helped support the trade last week. The upside movement was limited with a good weather forecast and talk that USDA could tweak the yield number up in next month’s report. As of midmorning on Aug. 15, the September contract was up 14 cents for the week, while the December contract gained 14.25 cents.

The corn futures traded slightly higher on Aug. 11 with short covering ahead of the Aug. 12 USDA report. Traders were expecting the crop conditions to remain stable with the previous week, and they did. Aug. 12 was report day and the futures closed with small gains. The report did increase the yield and production for this year’s crop, but below estimates, and that supported the market. USDA estimated the yield at 167.4 bushels per acre and production at 14.032 billion bushels. The yield estimate was lower than the 170.098 bushels per acre expected by traders, but still a record. They are also predicating 11 states to set a new corn yield record this year. USDA lowered 2013 to ’14 ending stocks by 65 million bushels to 1.181 billion bushels, while increasing corn use for ethanol by 45 million bushels and exports by 20 million bushels. USDA also estimated stocks for 2014 to ’15 at 1.808 billion bushels, well below the trade estimate of 2.005 billion bushels. They estimated global ending stocks for 2014 to ’15 at 187.8 million metric tons, slightly lower than July at 188.05 million metric tons.

Corn was able to trade slightly higher for the last three days of last week. Traders were still absorbing the report that was considered neutral, while the surprise was that USDA did not raise the yield as much as expected. The yield could be adjusted higher next month if the weather remains benign, and ear weights in the survey were the third highest on record for this report. The Farm Service Agency also said that there were 1.54 million acres of preventative plant this year, and the question is if USDA will adjust their acreage number going forward.

The crop progress report has the corn rated at 73 percent good to excellent, 20 percent fair and 7 percent poor to very poor. Ratings were 64 percent, 25 percent and 11 percent respectively one year ago. Corn that is silking is at 96 percent versus 93 percent one year ago and a five-year average of 95 percent. Corn in the dough stage is at 54 percent versus 30 percent one year ago and a five-year average of 46 percent.

Soybeans

As of the Aug. 14 close, November soybeans were 28.75 cents lower for the week. At 10 a.m. on Aug. 15 November soybeans were trading 1.5 cents higher.

Soybeans traded lower throughout the day Aug. 11 as bearish expectations for the Aug. 12 USDA report pressured the market. The export inspections were bearish, coming in well below the amount needed to keep pace with USDA’s projection. Soybeans remain in a downtrend, though trade has been mostly sideways over the past month with solid demand providing support to the market. That demand was displayed again Aug. 11 with an announced sale of 168,000 metric tons of soybeans to China for 2014 to ’15 delivery.

Soybean trade was lower the morning of Aug. 12 ahead of USDA’s August World Agricultural Supply and Demand report. Light follow-through selling and negative expectations for the report combined with the Aug. 11 crop progress report to pressure the market. The Aug. 11 report showed maturity remains ahead of the five-year average while crop conditions declined 1 percent. The WASDE report estimated soybean production at 3.816 billion bushels, up from 3.8 billion bushels in July’s report. The yield estimate was raised to 45.4 bushels per acre from 45.2 bushels per acre last month. U.S. ending stocks for the 2014 to ’15 year were projected at 430 million bushels, above pre-report expectations and the July number of 415 million bushels. World ending stocks increased to 85.62 million metric tons from 85.31 million metric tons last month. Argentine and Brazilian soybean production estimates were unchanged at 54 million metric tons and 91 million metric tons, respectively. The fundamental outlook for soybeans remains bearish, though solid demand continues to provide underlying support.

Weather remains mostly neutral for pod-setting soybeans, though there are some nice rain chances in the five-day forecast. The fundamental outlook for soybeans remains bearish, but strong export demand continues to provide underlying support.

Soybeans blooming were at 92 percent, compared with 85 percent the previous week and the five-year average of 91 percent. Soybeans setting pods were at 72 percent, compared with 57 percent the previous week and the five-year average of 65 percent. Conditions for soybeans were down 1 percent at 70 percent good to excellent, 23 percent fair and 7 percent poor to very poor.

Barley

As of Aug. 10, barley harvest was estimated at 17 percent complete, compared with zero last week and 17 percent for the five-year average. Barley’s crop condition rating dropped 1 percent to 65 percent good to excellent, 30 percent fair and 5 percent poor to very poor.

The Aug. 14 cash feed barley bid in Minneapolis was unchanged at $2.50 per bushel while malting bids were unchanged at $5.90.

Durum

As of Aug., 10, 3 percent of North Dakota’s durum crop was mature compared with zero the previous week and zero for the five-year average. North Dakota’s durum crop condition rating was 84 percent good to excellent, 15 percent fair and 1 percent poor, unchanged from the previous week.

The Aug. 14 cash bids for milling quality durum were at $8.80 per bushel in Berthold, N.D., while Dickinson, N.D.’s bid was at $8.67.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending Aug. 14 with $11.50 (Canadian) losses. Canola traded with minor losses in each of the sessions last week (except for Aug. 13 which was unchanged). Early selling was tied to spillover pressure from a weaker U.S. soybean complex, as well as from position squaring ahead of USDA’s August crop production estimates. Late session pressure spilled over from a lower palm oil market as Malaysian palm oil traded to five-year lows. Losses were limited by strength in the U.S. soybean complex.

As of Aug. 10, North Dakota canola was 64 percent turning color compared with 44 percent the previous week and 67 percent for the five-year average. Canola’s crop condition rating increased 3 percent to 88 percent good to excellent, 11 percent fair and 1 percent poor.

The Aug. 14 cash canola bids in Velva, N.D., were $16.70 per hundredweight.

Dry edible beans

As of Aug. 11, North Dakota’s dry bean crop (40 percent of the nation’s crop) was 64 percent setting pods, compared with 44 percent the previous week and 77 percent for the five-year average. North Dakota’s crop was rated 69 percent good to excellent, 24 percent fair, and 7 percent poor to very poor, down 2 percent from the previous week. Minnesota’s crop (7 percent of the nation’s crop) was 9 percent setting pods, compared with 46 percent the previous week. Minnesota’s crop was rated 53 percent good to excellent, 34 percent fair and 13 percent poor to very poor, unchanged from the previous week. Nebraska’s crop (10 percent of the nation’s crop) was 68 percent setting pods compared with 25 percent the previous week and 67 percent for the five-year average. Nebraska’s crop was rated 81 percent good to excellent, 15 percent fair, and 4 percent poor to very poor, unchanged from the previous week. Michigan’s crop (12 percent of the nation’s crop) was 46 percent setting pods, compared with 28 percent the previous week and 54 percent for the five-year average. Michigan’s crop was rated 75 percent good to excellent, 20 percent fair and 5 percent poor to very poor, 2 percent less than the previous week.

Sunflowers

As of Aug. 10, North Dakota’s sunflower crop was 44 percent in bloom, compared with 21 percent the previous week and 55 percent for the five-year average. North Dakota’s sunflower crop was rated 80 percent good to excellent, 19 percent fair and 1 percent poor, a 1 percent increase from the previous week.

The Aug. 14 cash sunflower bids in Fargo, N.D., were at $17.55 per hundredweight. New crop bids were $17.80.

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