Export market shows potential life
Corn: fresh export sales
The corn market climbed back above the $6 level and gained 6 cents last week. Market support came from new export sales last week and the lack of farmer selling. Widespread rain is expected to fall in the parched regions of South America in the coming days, but traders are saying that the damage has been done and the rain is too late.
On Jan. 17, corn opened 8 cents higher and traded firm for the session. The weekend rains in Argentina were disappointing and the forecast remained dry last week, which added strength Jan. 20. The six- to-10-day forecast calls for rain, so the market will have to wait all week to see if that forecast holds. The trade data for November showed ethanol exports at 152.5 million gallons, and that pushed year-to-date export totals to 1.02 billion gallons. Brazil was the largest importer. The market also found support from a 4 percent jump in the Chinese stock market.
On Jan. 18, corn opened 4 cents lower and dipped to a four-week low as the weekend approached with rain forecast for South America. The forecast calls for up to 1.5 inches of rain. This rain may be arriving too late for some crops, but traders think that damage is already priced in. Late planted crops should see good growing conditions. Noncommercial selling provided pressure, despite positive outside forces. Egypt bought 120,000 tons of U.S. corn.
Corn opened 5 cents higher on Jan. 19 and traded with strength for the session. The market found support from fresh export news. Announcements were that South Korea bought 110,000 metric tons and Mexico bought 154,700 metric tons of U.S. corn. The lack of farmer selling is also adding strength. A negative note in the trade Jan. 20 was that the International Grain Council raised its estimate of 2011 to 2012 total global grain stocks by 9 million metric tons from last month and just 1 million metric tons below the previous year. The group also revised its global corn use forecast up by 6 million metric tons, but raised the global crop upward by 8 million metric tons from last month.
Ethanol production for the week ending Jan. 13 averaged 941,000 barrels per day. This is down 0.32 percent compared with last week and up 3.1 percent compared with last year. Total ethanol production for last week was 6.587 million barrels. Corn used in the previous week's production is estimated at 100.24 million bushels. Corn use needs to average 95 million bushels per week to meet the U.S. Department of Agriculture's forecast. Stocks were 19.535 million barrels, up 4.1 percent vs. last week and up 9.7 percent vs. last year.
Wheat: market follows corn
The wheat markets finished last week unchanged to 14 lower. The Chicago market had little change for the week as it continued to trade in line with the corn market. The Kansas City market had losses of up to 14 cents for the week as crop conditions look to improve in the Western winter wheat belt, while Minneapolis held small losses as the cash market continues to support the quality wheat futures.
Wheat opened 6 cents lower in Chicago on Jan. 17 and remained in lock step with the corn market for the day, finishing with small gains. The Minneapolis market had stronger gains due to some renewed strength in the cash market. There was support from the lower dollar index as positive Chinese gross domestic product numbers created strength in the stock markets and weakness in the dollar. There are reports that up to a third of the Ukrainian winter crop is in poor condition, and wheat importers are starting to turn to Southern hemisphere sources.
On Jan. 18, wheat opened 6 cents lower in Chicago and came under increased pressure late in the day due to the losses in the corn market. There was also technical selling after the market pushed below psychological support at $6. Kansas City had the largest losses since the winter wheat crop has developed more potential, and Minneapolis had the lighter losses as that market remains bullishly inverted. Chicago wheat approached four-week lows, with support at $5.80.
Wheat opened 4 cents higher in Chicago on Jan. 19 and followed the corn market higher to finish with a 13 cent gain. Minneapolis and Kansas City had quieter trade with little news to trade on. Open interest in the Chicago market has grown during the recent downtrend, with the net short position approaching record levels. This has set the market up for volatile short-covering sessions like what happened on Jan. 20.
On Jan. 20, the trade brought light losses in the wheat markets as corn and Chicago wheat flirted with the $6 support level. Export sales were strong for wheat, but shipments continue to lag.
USDA reported last week's wheat export inspections pace at 13.5 million bushels. This brings the year-to-date export shipments pace for wheat to 620.3 million bushels compared to 706 million bushels for last year. With 20 weeks left in the marketing year, shipments need to average 16.3 million bushels to keep pace with USDA projections.
Soybeans gained 15 to 30 cents last week. Nearby contracts had the larger gains as commercial traders become more bullish with new demand news. Weather forecasts for South America changed daily, causing volatile trade.
Soybeans opened 8.5 cents higher on Jan. 17 and climbed to a close of $11.835, ending a four-day slide in prices. The South American weather forecast was positive for soy prices, as Argentina was expected to be hot and dry. There were signs of better demand than anticipated as well, as China is likely to raise soybean imports. Soybeans received support from positive outside markets. A sharp increase in gold combined with a decrease in the U.S. dollar caused some speculative buying. Increased crude oil prices provided support as well.
On Jan. 18, soybeans opened down 7.5 cents and traded mixed with negative weather forecasts for South America. Rain was anticipated last weekend, and many traders believed the driest growing conditions have passed. Outside market forces were mostly positive, with higher equity and energy markets, as well as a weaker U.S dollar. Active selling in other grain markets sparked selling in soybeans as well.
On Jan. 19, soybeans opened up 9.5 cents and closed at $11.970, just above the 10- and 20-day moving average of $11.960. Some support was provided by continued dry conditions in South America, though rain in the forecast for last weekend provided opposite pressure as well. Futures spreads are weakening as commercial traders become more bullish. Higher trade was supported by increased Chinese buying as USDA confirmed the sale of 110,000 metric tons of U.S. soy for 2012 to 2013 delivery.
Soybeans traded lower on Jan. 20 after falling back under $11.97 in the overnight session. With traders anticipating rain in South America, there was weather premium to be taken out of the market in the Jan. 20 trade. Outside markets gave little direction.
USDA reported last week's soybean export inspections pace at 40.9 million bushels. This brings the year-to-date export shipments pace for soybeans to 640 million bushels compared to 891.7 million bushels for last year at this time. Last week's soybean export sales pace was estimated at 36.4 million bushels. This brings the year-to-date export sales pace for soybeans to 938.5 million bushels compared with 1.343 billion bushels last year at this time. With 33 weeks left in soybean's marketing year, shipments need to average 20 million bushels and sales need to average 11 million bushels to make USDA's 1.3 billion-bushel projection.
The barley export shipments pace remained at 5.6 million bushels compared to 4.5 million bushels for last year at this time. Cash bids in Minneapolis were at $5.15 for feed and $7.15 for malting barley.
USDA reported export inspections of 61,000 bushels for durum last week. There were 300,000 bushels of cancellations for export sales, with durum's export sales pace at 14.9 million bushels compared to 29.4 million bushels for last year at this time. Cash bids for milling quality durum are at a discount to spring wheat, giving durum producers no incentive to sell.
Canola futures on the Winnipeg, Manitoba, exchange gained around $6 (Canadian) per ton for the week, with the March contract trading at $521 (Canadian) per ton on Jan. 20. Canola followed the soybean market closely with daily weather reports from South America. There was some pressure from the stronger Canadian dollar, but canola has had a firm undertone due to strong domestic demand. Ag Canada is projecting a record 2012 canola acreage of 19.778 million acres, but the strong demand kept the market from turning lower. The Jan. 19 cash canola bids in Velva, N.D., were at $24.21.
Last week's soybean oil export sales pace was estimated at 18.7 trillion metric tons. This brings the year-to-date export sales pace for soybean oil to 190.1 trillion metric tons compared to 1027.4 trillion metric tons for last year at this time. The Jan. 19 cash sunflower bids in Fargo, N.D., were at $27.95.
Dry bean markets remain firm, with Mexico showing continued interest in pintos and growers holding inventories relatively tight. Prices are steady to firm at $45 for pintos, navies, and blacks.
Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach Grabanski at (800) 450-1404.