Conditions, cancellations pressure market

Wheat: last week's gains fade

Wheat started last week off on a strong note, but faltered for the rest of the week. For the week ending May 24, July Minneapolis dropped 15.5 cents, September Minneapolis dropped 14 cents, July Chicago dropped 34 cents, and July Kansas City gave up 18.5 cents. Wheat was under pressure from spill-over selling from the other grains as well as from high crop ratings for spring wheat.

Wheat opened lower and traded both sides of unchanged throughout the session. Weather concerns continue to play a key role as extended forecast models remain dry. A chance for rain in Russia limited gains in wheat. The outside markets were positive with crude oil higher and the U.S. dollar lower.

Wheat traded lower May 22 on renewed noncommercial selling. Traders believe concerns over dry weather in the Southern Plains and Russia have been priced into the recent rally. In addition, rain is in the forecast for Russia, limiting buying interest. The collapse in the other grains spilled over to push wheat lower. Outside markets pressured wheat, with crude oil lower and the U.S. dollar sharply higher. The U.S. Department of Agriculture confirmed a sale of 100,000 metric tons of wheat to Iraq.

On May 23, wheat opened lower with selling spilling over from the other grains as all three of the major grains traded with losses in the early stages of the session. Corn was able to firm slightly and end with gains and that did help wheat to recover some of its losses. Additional selling was also tied to pressure from a strong U.S. dollar, which is finding buying support from concerns in Europe. This, of course, makes U.S. products more expensive in the export market and less attractive to buyers.

Wheat was higher through most of the May 24 session, but weakness in the corn market led to increased speculator selling from Chicago contracts, leading to small losses in Chicago old-crop wheat. Minneapolis and Kansas City wheat were able to close with small gains, with Kansas City receiving support from Kansas yield reports coming in well below expectations. A turn stronger in the U.S. dollar later in the trading session placed additional pressure on the wheat complex.

USDA reported wheat export inspections pace for the week ending May 18 at 24.9 million bushels. With two weeks left in the marketing year, shipments need to average 15.7 million bushels to keep pace with USDA's projection of 1.025 billion bushels. Wheat export sales pace for the week ending May 18 was estimated at 30.4 million bushels with 2.7 million bushels being old crop while 27.7 million bushels were new crop. With two weeks left in the marketing year, wheat has reached USDA's projected export sales pace of 1.025 billion bushels.

Corn: slow old-crop export sales

The corn market took back everything it gave us the previous week as of the May 24 close, with the July contract down 57 cents and December was down 22 cents. An improved weather forecast and disappointing old-crop export sales triggered profit-taking last week. The crop has also been planted at a record pace and is in excellent condition.

Corn traded slightly lower on May 21 and sharply lower on May 22. Pressure on May 21 came from a disappointing export inspections report and lower cattle on feed numbers. Feedlot cattle numbers will be smaller this year and that could impact feed usage. On May 22, the market traded sharply lower with a record high 96 percent of the corn planted and an excellent crop rating of 77 percent good to excellent. Planting progress and conditions are well ahead of average, which means that corn should be pollinating before the summer heat. There were also rumors on May 22 that China had cancelled some of its corn purchases and the funds were active sellers. The basis appears to be widening and trade talk is that the market for the week ending May 18 created some farmer selling.

Corn had small gains on May 23, but closed sharply lower on May 24. Higher trade on May 23 was supported by talk of the May 22 move being overdone. The ethanol report was also good to add support. The market was again under pressure on May 24 with a bearish export sales report triggering long liquidation selling. Recent export sales for old crop have been disappointing and that especially pressured the July contract. Talk of cheaper corn in Brazil and its second crop corn harvest is under way with the possibility for big yields. The weather was expected to be hot and dry last weekend in the U.S., but the latest forecast called for a cold front to move in this week along with rain in the Midwest and eastern Corn Belt.

Ethanol production for the week ending May 18 averaged 919,000 barrels per day, which is up 1.66 percent versus the previous week and up 1.88 percent versus last year. Total ethanol production for the week was 6.433 million barrels, which is the highest since Feb. 17. Corn used in production for the week ending May 18 was estimated at 97.89 million bushels and needs to average 93.7 million bushels per week to meet USDA's projected production. Stocks were 21.4 million barrels, which is up 3.7 percent versus the previous week and up 2.89 percent versus last year.

USDA's export inspection report was bearish for corn. There were 23.3 million bushels of corn reported shipped, below the 35.2 million bushels needed to meet USDA's projection of 1.7 billion bushels. The export sales report for corn was 19 million bushels, of which 6.1 million bushels was old crop and below 13.1 million bushels that was needed to meet USDA's projection of 1.7 billion bushels. Total shipments last week were at 27.1 million bushels and below the 36.1 million bushels needed last week.

Soybeans: weather concerns

As of the May 24 close, July soybeans were down 30.25 cents last week and the November contract was down 12.75 cents. Concerns of Chinese import cancellations pressured the soybean complex last week as China attempted to control food inflation concerns by releasing domestic supplies of corn and soybeans.

Soybeans opened last week higher amid ideas the market may need to add a weather premium because of a lack of rain in the forecast. Weather is becoming an important factor for new-crop soybeans, which explains its strong performance compared with old crop. The tightening global stocks situation led to strong commercial buying, though commercial selling was observed as well, limiting gains in the old crop. The outside markets were supportive with losses in the U.S. dollar and strong gains in the Dow Jones.

Soybeans traded lower overnight on May 22 and 23. Weather concerns continued to play a role as moisture was added to the forecast. May 22 saw rumors of slower Chinese demand coupled with possible cancelations pressured the market. Outside markets were negative both days with the U.S. dollar sharply higher. The soybean market remains susceptible to long liquidation as noncommercial traders hold a sizable net-long futures position.

The May 24 session had soybeans trading higher throughout the day. Rumors of China canceling orders were shown to be partially true, as China cancelled four cargos of Brazilian soybeans. Additional support came from the Buenos Aires Exchange lowering crop estimates for Argentina to 39.9 million metric tons compared with USDA's 42.5 million metric tons estimate. Weakness in corn pressured soybeans, leading them to close well off the daily highs. The May 24 export sales report from USDA was bullish, with year-to-date sales now beyond USDA's projection with 15 weeks left in the marketing year.

USDA reported soybean export inspections pace for the week ending May 18 at 12.7 million bushels. Soybean export sales pace for the week ending May 18 was estimated at 29.4 million bushels. With 15 weeks left in soybean's marketing year, shipments need to average 11.1 million bushels and sales have exceeded USDA's 1.3 billion bushel projection.

Barley

USDA reported no barley export inspections for the week ending May 18. There were no reported barley export sales for the week ending May 18.

Cash feed barley bids in Minneapolis were at $5.25 per bushel while malting barley bids were $7.05.

Durum

USDA reported durum export shipments pace for the week ending May 18 at 91,000 bushels. There were no reported durum export sales for the week ending May 18.

Cash bids for milling quality durum on May 24 were at $7 per bushel in Berthold, N.D., while Dickinson, N.D.'s bid was at $7.10.

Canola

Canola futures on the Winnipeg, Manitoba, exchange ended the week on May 24 with almost $12 (Canadian) in losses. It was a short week of trading for canola as the market was closed on May 21, but it made up for the closing by trading sharply lower for the beginning of the week. Pressure was from broad-based selling as all of the vegetable oil markets were under pressure early last week. Additional selling was tied to rumors that China was canceling purchases of Brazilian soybeans. Canola traded with strength on May 24 because of a stronger U.S. soybean complex. Routine Japanese buying added support.

As of May 20, 96 percent of North Dakota's canola crop had been planted compared with 82 percent the previous week and 60 percent for the five-year average. Emergence was estimated at 60 percent compared with 26 percent for the previous week and 26 percent for the five-year average. Minnesota producers are reporting canola planting progress at 99 percent complete compared with 87 percent the previous week and 64 percent for the five-year average.

Cash canola old-crop bids on May 24 were $27.19 per hundredweight while new crop bids were $23.71.

Sunflowers

Sunflower oil export sales pace for the week ending May 18 was estimated at 24.4 trillion metric tons, with 9.4 trillion metric tons being old crop and 15 trillion metric tons being new crop. This brings the year-to-date total sunflower oil exports sales pace to 420.5 trillion metric tons, compared with last year's 1,177.6 trillion metric tons.

Cash sunflower bids on May 24 in Fargo, N.D., were at $25.35 per hundredweight for old crop while new-crop bids were $23.40.

Ray Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach Grabanski at (800) 450-1404.