February starts on firm footing
Corn: steady with strong exports The corn market remained unchanged last week and traded near $6.40 in the March contract. The futures traded in a sideways pattern last week as it lacked any fresh news. Decent export sales last week, a firm cash ...
Corn: steady with strong exports
The corn market remained unchanged last week and traded near $6.40 in the March contract. The futures traded in a sideways pattern last week as it lacked any fresh news. Decent export sales last week, a firm cash market and lack of farmer selling offered support. A wetter forecast for South America and the U.S. central plains limited the upside.
To start last week, corn opened 8 cents lower and traded under pressure for the session. An improving weather forecast for South America, with more rain falling during the previous weekend than expected and a wetter forecast for southern Brazil and Argentina last week created pressure. The sharp break in the soybean complex also weighed on the corn market. Exports have been good lately, but the inspections were disappointing Feb. 3.
On Jan. 31, corn opened 8 cents higher and traded with strength for the session. The dollar was under pressure as Greece is making progress with its bond holders. The wheat market also traded with double digit gains and that spilled over to corn. Mexico has been a large importer of U.S. corn this winter and today its ag minister estimated its 2011 production at 19.2 million metric tons, while the last U.S. Department of Agriculture estimate had the crop at 20.5 million metric tons.
Corn opened 11 cents higher on Feb. 1, but softened into midsession and closed with small gains. The futures found support early from the positive outside markets and the strength in the wheat and soybean trade. Positive economic news out of China and Germany added pressure to the dollar. Shrinking production estimates for South America and lack of farmer selling also offered support. The Feb. 3 extended forecast also had less rain in it for Argentina and another good ethanol report was seen as positive news. There was also profit taking with moisture in the forecast for Nebraska and Iowa last weekend.
On Feb. 2, corn opened 6 cents lower, but quickly firmed up and traded slightly higher for the session. It was a back-and-fill day in the corn market and traders viewed the lower opening as a buying opportunity. The futures found additional support from fresh export news where Japan purchased 107,340 metric tons of U.S. corn. The export sales report was also decent for corn and slightly above estimates, adding some strength. The upside was limited with an improved South American weather forecast.
Ethanol production for the week ending Jan. 27 averaged 939,000 barrels per day, up 0.54 percent versus the previous week and up 3.4 percent versus last year. Total ethanol production for the week was 6.573 million barrels. Corn used in last week's production is estimated at 100.02 million bushels as compared with 94.7 million bushels necessary each week to meet this crop year's USDA estimate of 5 billion bushels. Stocks were 20.945 million barrels, which was up 5.7 percent versus the previous week and up 10.8 percent versus last year and a new record high.
Wheat: new export possibilities
The wheat markets had net gains of 5 to 15 cents last week. The market has had an impressive rally off of the January lows due to hopes for stronger export business in the future, but encountered some technical selling pressure late in the week.
Wheat opened 7 cents lower on Jan. 30 because of pressure from outside markets, and row crops had steep losses because of rains in South America. Those losses were recovered in a strong 16-cent rally on Jan. 31. Russian officials publicly discussed starting export restrictions in April. Cold weather has spread winterkill concerns from parts of Russia and the Ukraine into Poland and Germany. There was also support from a lack of improvement in U.S. winter wheat. Winter wheat conditions have dropped in all major hard red winter producing states, except Texas. Kansas is rated 49 percent good to excellent, down from 53 percent the previous month. In other states, Texas is up 3 percent at 26 percent good to excellent, Oklahoma down 9 percent at 54 percent good to excellent, and Nebraska down 9 percent at 65 percent good to excellent.
Wheat opened 13 cents higher on Feb. 1 and had gains for the day. A sale of U.S. soft red winter wheat to unknown destinations has raised speculation that Egypt is buying U.S. wheat, which would be a positive sign for future export business. Egypt has been buying from the Black Sea region, but exports have begun to slow from there as they are growing concerned about preserving domestic supplies. North America and Australia still have ample supplies of wheat, so this latest rally may be difficult to sustain once traders take a step back and look at the global stocks of wheat.
On Feb. 2, wheat opened 5 cents lower in Chicago. The winter wheat markets had losses for the day because of profit taking and technical pressure, while the Minneapolis market found support as trade in that market is still catching up with the recent Chicago rally. Outside markets were quiet, and there was no fresh news out of Eastern Europe, which allowed wheat to drift off its recent highs. March Chicago wheat gained more than a dollar from the January lows, so a technical setback is due.
On Feb. 3, the trade brought light losses across the wheat markets as the dollar turned higher and profit taking stepped into the wheat markets. Headlines have focused on hope for future export business, but the recent rally has made U.S. wheat less competitive again on the world market. India is projected to produce a record wheat crop.
Soybeans: push from exports
Soybeans gained 10 to 30 cents last week. Commercial traders appear to be turning bullish, as nearby contracts experienced larger gains last week than the deferred. Weather in South America and Eastern Europe was influential toward soybeans last week.
Soybeans opened 17.5 cents lower to start the week on Jan. 30, and fell throughout the session as the South American weather forecast looks beneficial for the next few weeks. Rains in Argentina are improving crop conditions, while dryer conditions in northern Brazil are good for the early soybean harvest. Outside markets provided pressure as crude oil was down and the U.S. dollar was up, sparking noncommercial selling. The weekly export inspections came in well above anticipated levels.
On Jan. 31, soybeans opened up 7.25 cents on support from positive outside markets early in the session. Soybeans received support from a weak dollar early and from strong gains in wheat throughout the session. The South American weather forecast still remains generally negative, though the slow early harvest in the northern parts of Brazil has kept the U.S. export window open. Stronger export demand led to firming of the basis, which in turn caused the carry to weaken in futures spreads. Commercial buying lifted soybeans to the session high just before trade closed.
Soybeans opened 13.75 cents higher on Feb. 1. Soybeans finished near the session high on follow-through buying from both commercial and noncommercial traders. Extreme cold in Eastern Europe lifted wheat prices, providing some spillover support to soybeans. Continued hot, dry conditions in southern Brazil provided support as well. Outside markets were generally positive, with strong equity markets and a sharp drop in the U.S. dollar.
On Feb. 2, soybeans opened 8.25 cents lower but quickly recovered, trading at a high of $12.24 before ending the session at the 100-day moving average of $12.17. Reports that key growing areas in Argentina had missed out on recent rains and that hot, dry conditions continue in southern Brazil supported the market. The South American forecast still shows rain in the near-term, with drier conditions returning in the longer term.
USDA reported no export inspections for barley. The barley export shipments pace is at 5.6 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 $5.30 for feed and $7.15 for malting barley.
USDA reported export inspections of a whopping 1,000 bushels for durum last week. There were no new export sales reported, with durum's export sales pace at 14.9 million bushels compared with 30.2 million bushels for last year at this time. Cash bids for milling quality durum are at a discount to spring wheat, with bids in the $7.50 to $7.90 range.
Canola futures on the Winnipeg, Manitoba, exchange gained from $3 to $4 (Canadian) per ton for the week. Canola followed gains in the soybean market for the week with gains fueled by strong demand. Frigid temperatures in Eastern Europe have raised concerns about winterkill in its rapeseed production, which supported new crop canola contracts. Feb. 2 cash canola bids in Velva, N.D., were at $24.61.
Last week's soybean oil export sales pace was estimated at 6.7 trillion metric tons. Feb. 2 cash sunflower bids in Fargo, N.D., were at $26.30.
Dry bean markets remain firm, with strong Mexican demand creating strength in pinto bids. Pinto bids are now in a range from $45 to $48 in the North Dakota/Minnesota region, reaching producer price targets. Prices are steady at $45 for navies and blacks.
Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach Grabanski at (800) 450-1404.