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Published August 31, 2009, 09:18 AM

CROP MARKETS: Wheat remains oversold

The wheat market is oversold and as soybeans rose sharply higher, it provided the needed momentum to pull wheat higher as well.

By: Ray Grabanski, Agweek

WHEAT

Wheat started out the week by moving higher on a technical bounce. The market is oversold and as soybeans rose sharply higher, it provided the needed momentum to pull wheat higher as well. Outside markets were mixed with crude oil ending higher and the U.S. dollar also finishing higher for the day. Spring wheat markets are waiting to see the USDA Crop Progress report, which tells how far harvest was able to progress over the weekend.

Wheat finished slightly lower Aug. 25 after falling from the morning rally. The market started out moving sharply higher on short covering. Wheat was able to finished higher Aug. 25 and that momentum carried into the morning. However, by about midsession, the rally had run out of steam and the market trimmed gains on negative spillover pressure from neighboring grains. The fact that wheat is oversold and due for a bounce is most likely what allowed for the market to remain with only minor losses for the day. Also, a feature in the market today was spreading between the Kansas City Board of Trade and the Minneapolis Grain Exchange, which allowed KCBT to finish with gains in the front contract months.

The wheat market moved higher Aug. 26 on short covering. The market continued to be oversold, and may have reached its technical bottom, which is bringing prices higher. Helping the upward momentum is an export sale for 2.2 million bushels to Egypt for the 2009 to ’10 marketing year. This is important because one of the limiting factors to the market has been the low demand for U.S. wheat on the global market with other suppliers also having plentiful stocks. It is important that prices don’t rise too far, however, as higher prices will price U.S. wheat out of the global marketplace. Spring wheat harvest continues to make progress after a slower start because of late planting and cooler temperatures. Wetter conditions in the U.S. plains states has hindered harvest progress lately, though drier conditions in the next few days should help producers make up some progress.

Wheat fell lower Aug. 27 with traders focusing on the bearish global fundamentals. The fact that wheat remains plentiful globally is hindering any effort for the market to recover. Export sales in the morning were favorable, though the thought is that the market needs more than one good week to make up for the lack of demand. The MGEX saw more pressure as spring wheat harvest continues to make progress and with traders buying KCBT and selling MGEX.

CORN

December corn futures were 4 cents higher this week compared with the close Aug. 21. The corn market had no fresh news this week to make it move and was content to trade sideways just as the outside markets. The cooler weather through the Corn Belt for the next week and when the first frost will hit is starting to enter into traders conversations.

To start the week the corn market opened slightly higher and closed at session near-highs with 7- to 9-cent gains. The market opened higher on strength in the overnight and soybean markets.

The corn market opened slightly higher Aug. 25 and closed at near session lows with 9- to 10-cent losses. The trade expected Aug. 24’s USDA progress report to come out with a lower rating for corn and it did just the opposite adding 2 percent to the good-to-excellent category going from 68 percent last week to 70 percent this week. Also, crude oil broke lower (down $2.50 per barrel) and that pressured the corn market.

The corn market opened mixed Aug. 26 and closed slightly lower with 0.5- to 1-cent losses. The market had no news to make it go one way or another and ended with slight losses. The outside markets were flat today and did not have any influence on the corn market. Also, the six to 10 day forecast for the Corn Belt is for below normal temperatures. The market does not know which way to trade the weather forecast, because we have potential for a very big yield, but lower temperatures will slow the maturity

The corn market opened mixed Aug. 27 and closed slightly higher with 2- to 3-cent gains. The USDA export sales report was neutral to the market as it came in within estimates.

The market opened slightly higher Aug. 28 with the strength in the soybean market. The corn market has been content to trade sideways all week.

The corn market did not do much this week. The outside markets were flat and the weather forecast did not influence the market. The weather forecast for the Corn Belt during the next 10 days calls for below-average temperatures, but not cool enough for a frost. The market is looking at the crops potential, which is large, but lower temperatures will slow maturity. The past couple of weeks, we have traded with the outside markets and soon we should see the weather play a larger role in the corn market.

SOYBEANS

The market closed sharply higher Aug. 24 on strong demand and crop concerns. The market rose sharply higher as traders focused on the strong export demand and the shortage of stocks. As we move toward the end of the marketing year, traders are recognizing more than ever the small amount of stocks and what damage to the U.S. crop could mean. There is concern that an early frost could damage the crop, which is behind in development because of a late planting season. This had traders adding premium back into the market. Also, after a trend of losses the market was due for a technical bounce which is helping the upward momentum.

Soybeans fell lower Aug. 25 on profit-taking on a turnaround type trading session. After premium recently being added to the market on frost concerns, traders turned to focus on the bearish crop progress report from Aug. 24 afternoon. Crop conditions continue to be favorable and, in addition crop progress, has made strides to come fairly close to catching up with last year. In the background the fundamentals remain bullish. Concerns about an early frost are expected to continue to play a role in the market. Demand continues to remain strong with USDA reporting a sale by private exporters for 4.077 million bushels to China for the 2009 to ’10 marketing year.

At midweek, soybeans continued to fall lower on technical weakness. After Aug. 25’s lower close and with little fresh news to move the market, soybeans fell lower Aug. 26. Outside markets were not favorable with the U.S. dollar moving higher and crude oil moving lower. Also adding some pressure is the start of harvest in the southern states. However, fundamentals continue to remain bullish with concerns over frost and the need to improve supplies after old crop stocks are dwindling. These underlying fundamentals should help to limit losses moving forward.

Soybeans fell lower Aug. 27, with the market focusing on harvest pressure and nonthreatening weather in the short term. With harvest beginning in the southern states, the market is bracing itself as new supplies start to roll in. The September front month is sharply higher, reflecting the concern about the tight stock situation as the 2008 to ’09 marketing year comes to a close. Looking further out of the near term, there still are concerns about early frost with will continue to limit losses. In addition, export demand remains strong as is reflected in the export sales from the morning.

BARLEY

Barley loan deficiency payments are back. Aug. 27’s barley loan deficiency payment for Cass County, N.D., was at 17 cents. USDA reported no barley shipments for last week. This brings the year-to-date export sales pace for barley to 371,000 bushels compared with 1.52 million bushels for last year at this time. USDA reported no barley export sales for last week. This brings the year-to-date export sales pace for barley to 1.7 million bushels compared with 6.9 million bushels for last year at this time.

Cash feed barley bids in Minneaplois were unchanged at $1.55. Malting barley bids remain with no quote.

DURUM

Just as is the case with barley, durum loan deficiency payments are back. Aug. 27’s durum loan deficiency payment for Cass County, N.D., was at 16 cents. USDA estimated last week’s durum export shipments pace at 54,000 bushels. USDA reported last week’s durum export sales pace at 400,000 bushels. This brings the year-to-date export sales pace for durum to 13.3 million bushels compared with 10.8 million bushels for last year at this time.

CANOLA

Canola futures on the Winnipeg, Manitoba, futures exchange closed higher for the week with most of the contracts gaining around $7 (Canadian). The canola market traded higher in most of the session this week with strength coming from a stronger U.S. soybean complex as well as from a strong U.S. energy complex. But to everyone’s surprise, canola remained firm when the U.S. markets fell. Production concerns and the hint of frost in the extended weather forecasts have kept the canola market strong. Reports had freezing temperatures in parts of Alberta the night of Aug. 25, but so far, no damage has been seen. Additional support was a result of spillover from a stronger cash trade as well as from a strong export sales market. Production concerns has started to force end users to start to cover needs now to ensure that they will get supplies when needed. Thursday cash canola bids in Velva, N.D., ended at $17.28.

SUNFLOWER

Ninety-one percent of North Dakota’s sunflower crop was in bloom as of Aug 23, compared with 65 percent last week and 96 percent for the five-year average. Five percent of the states sunflower crop has ray flowers dried or dropping compared with zero last week and 37 percent for the five-year average. For the week ending Aug. 27, cash sunflower bids in Fargo, N.D., dropped 10 cents to end at $13.25 old crop and $13.80 new crop.

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