Corn: large 2012 production forecast
The corn market gained 10 cents last week. The futures came under pressure mid-week with larger acreage and production estimates for 2012. Buying interest did resurface late last week with fresh export sales.
On Feb. 13, corn opened 5 cents higher and traded with green numbers for the session. Early support came from the positive outside markets and more stability in global economies. December ethanol exports were a record at 172.7 million gallons and supportive to the corn trade, with 40 percent going to Brazil. The market stayed firm into the close with fund buying and spillover support from the soybean market.
Corn was under pressure on Feb. 14 and 15. The negative outside markets caused long liquidation profit taking. The U.S. Department of Agriculture baseline report also pressured the futures. The report, based on November estimates, has the corn acres for 2012 at 94 million and up from 91.9 million planted in 2011, with a yield of 164.5 bushels per acre. This would put the ending stocks for 2012 at 1.623 million bushels and up from 801 million bushels this year. The 94 million acres of planted corn would be the most since 1944. Additional weakness came from the wheat complex, as traders look at equally priced wheat competing with corn for export sales. Australia is also reporting record wheat production from its recently harvested crop.
Corn traded sharply higher on Feb. 16 with fresh export sales, as South Korea purchased 345,000 metric tons of U.S. corn. The export sales report was also good and above estimates. Corn found support from a better-than-expected ethanol report. Ethanol demand remains strong, but stocks are growing and margins are tight. The upside was limited with news that China signed an agreement to purchase corn from Argentina. Technically, the weekly chart action shows lower highs and lower lows.
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Commercial buying returned to the corn market on Feb. 17 with gains in the nearby contracts and little change in the deferreds. A sale of corn to South Korea was one on a list of many export sales last week in the grain markets. New crop corn contracts were stagnant last week, while new crop beans have gained ground as the beans try to attract acres.
Ethanol production for the week ending Feb. 10 averaged 928,000 barrels per day. This was up 0.54 percent versus last week and up 3.92 percent versus last year. Total ethanol production for the week was 6.496 million barrels. Corn used in last week's production is estimated at 98.85 million bushels. Corn use needs to average 94.5 million bushels per week to meet this crop year's USDA estimate. Stocks were 21.49 million barrels. This is up 2 percent versus the previous week and up 9.8 percent versus last year, which is a new record high.
Wheat: Egypt buys U.S. wheat
The wheat markets had gains of 5 to 15 cents last week. The Chicago market is back to following the corn market, with some refreshing news on the export front. The Kansas City market has some pressure from improving conditions in the Southern Plains, while the Minneapolis market needs to wait for spring planting intentions. Look for the Minneapolis market to continue to command a premium, at least until we get a spring crop started.
Wheat opened 6 cents higher to start the week on Feb. 13 and had gains for the day. After selling off sharply at the end of the previous week, noncommercial buying interest re-entered the grain markets thanks to weakness in the dollar and strength in the stock markets. A new Greek debt bailout plan and austerity measures brought a sense of relief to global stock markets and strength to the euro, which pressured the dollar.
Wheat opened 6 cents lower on Feb. 14 and finished the day with larger losses. Moody's downgraded the credit ratings of six European countries, which in turn brought strength to the U.S. dollar and pressure to the wheat markets. Australian officials raised their wheat crop estimate to a record 29.3 million metric tons, with 75 percent expected to be of milling quality, which is higher than before. Wheat came under pressure on Feb. 15 as well, due to continued gains in the U.S. dollar. Rain was expected to continue to help the wheat crop in the U.S. Southern Plains.
Noncommercial buying interest returned to the grain markets on Feb. 16 as the stock markets traded higher and the dollar slipped lower. Egypt bought 180,000 tons of U.S. wheat, the largest sale to Egypt in more than six months. An interesting side note is that Russia did not even put out an offer to fill the tender, a sign that exports are indeed slowing from that region of the world.
The trade was mixed on Feb. 17 in the hard wheat markets due to a lack of fresh news, while the Chicago market had decent gains as the market had found itself back at a discount to corn. There have been several new export sales of soft red winter wheat due to the fact that Chicago wheat is priced on par with corn, including sales to Egypt and unknown destinations.
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USDA reported wheat export inspections pace for the week ending Feb. 10 at 16.5 million bushels. This brings the year-to-date export shipments pace for wheat to 690.5 million bushels compared with 811.6 million bushels for last year. With 16 weeks left in the marketing year, shipments need to average 17.9 million bushels to keep pace with USDA projections.
Wheat export sales pace for the week ending Feb. 10 was estimated at 15.4 million bushels. This brings the year-to-date export sales pace for wheat to 837.5 million bushels compared with 1,089.2 million bushels last year.
Soybeans: driven by strong exports
Soybeans gained 20 to 40 cents last week. Commercial traders appear to be turning bullish, as nearby contracts experienced larger gains last week than the deferred. Expect new crop soybeans to remain firm relative to corn due to the need to secure acreage for the 2012 growing season.
Soybeans opened up 9 cents on Feb. 13 and climbed to gains of 23 cents on support from outside markets. Progress in Greece caused a dip in the U.S. dollar that was supportive to soybeans, and crude oil was sharply up as well. Renewed concerns over dry weather in southern Brazil provided support. The weakening carry-in futures spreads indicated solid commercial interest. Demand was solid as an export sale of 120,000 metric tons to an undisclosed location was announced. The weekly export inspections were bullish as well, coming in significantly above the level required to keep pace with the USDA's demand projection.
Soybeans closed up 3 cents on Feb. 14 and 6 cents higher on Feb. 15. News from South America was supportive, with continued dryness in important soy producing parts of southern Brazil, as well as a belief that USDA may be overstating production. Outside markets were negative on Feb. 14, but turned more supportive on Feb. 15. Export demand remained strong, as the USDA announced the sale of 283,000 metric tons on Feb. 14 and an additional 116,000 metric tons on Feb. 15.
Soybeans fell 2.75 cents on Feb. 16 in mixed trade. The market was technically overbought after reaching new highs the past three days, and this kept investors mostly to the sidelines. Losses were limited by commercial traders, who continue to grow more bullish as the futures spreads weaken further.
Soybeans traded higher on Feb. 17 with support from outside markets and export news. USDA reported sales to China of 173,000 metric tons for 2011 to 2012 delivery, as well as a whopping 2.75 million metric tons for 2012 to 2013 delivery.
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USDA reported soybean export inspections pace for the week ending Feb. 10 at 38.6 million bushels. This brings the year-to-date export shipments pace for soybeans to 794.4 million bushels compared with 1,059.6 million bushels for last year at this time. Soybean export sales pace for the week ending Feb. 10 was estimated at 16 million bushels. This brings the year-to-date export sales pace for soybeans to 1,005.2 million bushels compared with 1.429 billion bushels last year at this time.
Barley
USDA reported export inspections of 76,000 bushels of barley. The total pace is now at 5.8 million bushels compared with 4.5 million bushels for last year at this time. There were no new export sales for barley. Cash bids in Minneapolis were at $5.20 for feed and $7.10 for malting barley.
Durum
USDA reported export inspections of 234,000 bushels for durum last week. There were no new export sales reported last week. Cash bids for milling quality durum were in the $8 to $8.40 range.
Canola
Canola futures on the Winnipeg, Manitoba, exchange gained $20 (Canadian) per ton for the week in the March contract and $14 in the November contract. On Feb. 17, trade marked the 12th consecutive day of gains in the canola market, bringing the market within striking distance of the October highs. There has been strong demand for canola both domestically and on the export market, and the gains have triggered technical buy orders as well. Cash canola bids in Velva, N.D., were at $26.03 on Feb. 16.
Sunflowers
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Last week's soybean oil export sales pace was estimated at 21.1 trillion metric tons, with another 20-trillion-metric-ton sale to Morocco announced Feb. 17. Cash sunflower bids in Fargo, N.D., were at $25.70 on Feb. 16.
Dry beans
Dry bean markets remain firm, with prices leveling off after seeing large increases into 2012. USDA is reporting cash bids of $48 for pintos and $45 for navies and blacks. Crop insurance prices for 2012 have been set at $44 for pintos and navies, and $42 for blacks. The Risk Management Agency has essentially guaranteed substantially larger acreage for the 2012 crop year. We continue to advise producers to sign new crop contracts for anything $38 and higher.
Editor's Note: Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach Grabanski at (800) 450-1404.
