Grabanski: Markets push ahead with gains

Wheat
Wheat traded mixed last week, posting gains to start the week, while pressure was seen at midweek. Heavy deliveries and a strong dollar pressured, while technical buying helped wheat recover losses. For the week ending Dec. 3, March Minneapolis wheat gained 5.5 cents, March Chicago slipped 0.25 cents, and March Kansas City gained 10 cents. For November, December Minneapolis wheat dropped 2.25 cents, December Chicago wheat slipped 62 cents, and December Kansas City wheat dropped 36.75 cents.
Heavy deliveries against the December Chicago contract pushed wheat lower to start the week.
The unwinding of long Chicago and short Kansas City and Minneapolis wheat spreads also continues to be a main feature of traders’ attentions. Wheat is looking for direction, and with most months at or near recent lows, no one appears to be aggressive sellers.
The Dec. 1 and 2 sessions had all three wheat exchanges under pressure from continued heavier-than-expected deliveries against the Chicago exchange. Additional selling was tied to pressure from the U.S. Department of Agriculture’s Crop Progress report, which showed another improvement in wheat’s crop condition. Winter wheat conditions have steadily improved in recent weeks, because of rain. This should allow winter wheat to move into dormancy in good shape. A stronger dollar added selling pressure. The dollar saw support from reports that the European Union’s central bank is ready to introduce more easing measures on its currency, which will force the U.S. dollar higher. For this reason - a weaker Euro and strong U.S. dollar - traders are expecting to see wheat export’s pace to be reduced in USDA’s Crop Production report. The only bright spot for wheat came from reports Australia lowered its wheat production estimate to 24 million metric tons, compared with USDA’s estimate of 26 million metric tons.
The dollar was in correction mode Dec. 3, as it was sharply lower, posting as much as 2-cent losses at one point. This gave the grain market support, with wheat leading the way. Chicago wheat futures hit a five-year low Dec. 2, in part because of U.S. wheat not being competitive in global markets, and adequate global supplies. This support line gave the market strength. Minneapolis wheat gave back some of its gains at midday, and closed near the low end of the range. But the winter wheat exchanges were able to hold up, closing with double-digit gains for the day. Wheat export sales were disappointing, but they still were ahead of pace needed to meet USDA estimates.
For the week ending Nov. 29, USDA estimated the wheat export shipments pace at 10.1 million bushels.
The wheat export sales pace was estimated at 14.4 million bushels. Shipments need to average 16.3 million bushels, and sales need to average 10.3 million bushels to make USDA’s export pace of 800 million bushels.
As of Nov. 29, 93 percent of the nation’s winter wheat crop had emerged, compared with 90 percent the previous week, and 93 percent for the five-year average. Winter wheat’s crop condition rating improved 2 percent, to 55 percent good to excellent, 36 percent fair and 9 percent poor or very poor.
Corn
The corn market clawed its way higher last week, with support coming from the gains in wheat and soybean markets. The Environmental Protection Agency also released its report for renewable fuels. While the number for ethanol was below what was put into law in 2007, it was above the numbers being talked about this past spring.
Traders are also looking ahead to USDA’s supply and demand and production reports, which will be released Dec. 9. Most of the attention will focus on changes in demand and updated South American production. As of the Dec. 3 close, March was up 9.75 cents.
Corn traded slightly higher on Nov. 30 and Dec. 1. Light buying interest came into the market to start the week, as the market is trading near contract lows. Strength in soybeans also spilled over. Additional support came from early strength in the crude oil and ethanol markets.
Traders were looking ahead to the EPA’s ethanol mandate report.
EPA announced the ethanol mandate for 2016 at 14.27 billion gallons, which is below the 15 billion gallons set in the 2007, law, but greater than the amount proposed in April. EPA announced that refiners must use at least 18.11 billion gallons in 2016 of all biofuels, up from 17.4 billion gallons in 2015, but below the 22.25-billion-gallon target Congress set in 2007.
Buying interest went to the sidelines Dec 2, after talk that Argentina’s export tax will disappear on Dec. 10. This could bring more corn to the marketplace. Estimates say Argentina has 800 million bushels of corn available for export and Asian countries are waiting to buy when the tax is lifted. There are also estimates that Argentina’s corn acreage will be 10 percent larger than earlier estimates, while the country is 40 percent planted.
Additional weakness came from an ethanol report that showed production down and stocks up from the previous week. Short covering came into the market Dec. 3, and closed with small gains. Additional support came from strength in the wheat complex and the sharp break in the dollar.
Ethanol production for the week ending Nov. 27 averaged 956,000 barrels per day, down 5.16 percent from the previous week. Total ethanol production for the week was 6.692 million barrels. Corn used in production is estimated at 100.38 million bushels, and needs to average 98.74 million bushels per week to meet this crop year’s USDA estimate of 5.175 billion bushels. Stocks were 19.997 million barrels, up 1.89 percent compared with the previous week, and up 15.66 percent compared with last year.
USDA’s export inspections report was bearish for corn at 11.8 million bushels, below the 39.3 million bushels needed to meet USDA’s projection. Corn export sales were estimated at 19.7 million bushels and above the 28.9 million needed to meet USDA’s estimate of 1.80 billion bushels for the year.
Soybeans
South America news continues to be the main driver of the soybean market, and likely will be for the next four months. There have been inconsistent and spotty weather reports from South America during planting season.
The north is drier than normal and central Brazil has started to get more rain, but not much. The south is getting good moisture, but too much in some areas. It is still early in the growing year, but a lot of negative price news was built into the market, with South America expecting a good crop. Negative weather reports from South America started to get the market moving again. For the week ending Dec. 3, soybeans were up 24.5 cents.
Soybeans continued to make gains, closing higher to start the week. The market was starting to sort out the Argentina news, and it isn’t going to be as drastic for soybeans as initially thought.
With the 5 percent per year export tax decrease almost a certainty, farmers in Argentina will have a little less uncertainty moving forward. But they also shouldn’t be flooding the market the way they would have if the 90-day-tax free window was authorized. The soy market already had much of this negative news built in, so we are seeing the upside of the gradual decrease in export taxes. Soybeans kept a winning streak going, climbing higher Dec. 1.
Since reaching a six-year low recently, soybeans have climbed about 45 cents (January soybeans bottomed out at $8.4425 on Nov. 23). Decent exports and demand has given this market positive news.
Soybeans bucked the trend Dec. 2, as it was the only grain market (other than spring wheat) to push higher. Early support came from demand news, as USDA reported a sale of 124,000 metric tons of soybeans to an unknown destination. Additional support continues to come from the product market, primarily soybean oil. The new biodiesel mandate will help increase the demand for soybean oil, which is good for soybeans.
The strength of soybean oil continued to lead the way on Dec. 3, and got soybeans back to the $9 resistance level. Soy oil climbed above October highs, with positive news for RFS biodiesel numbers in EPA’s new Renewable Fuel Standard volumes. A weaker dollar gave grains strength, as the market was more than 2 cents lower Dec. 3.
For the week ending Nov. 29, USDA reported soybean export inspections at 67.4 million bushels. Shipments need to average 25.1 million bushels to make USDA’s export pace of 1.715 billion bushels. This brings the year-to-date export sales pace for soybeans to 1.21 billion bushels, compared with 1.46 billion bushels last year at this time. This is ahead of the pace needed to meet USDA estimates.
Barley
Dec. 3 cash feed barley bids in Minneapolis were at $2.60 per bushel. Malting barley had no quote.
Durum
Dec. 3 cash bids for milling quality durum were at $6.75 per bushel in Berthold, N.D., while the Dickinson, N.D., bid was at $6.85 per bushel.
Canola
Canola futures on the Winnipeg, Manitoba, exchange closed the week ending Dec. 3 with $12.20 (Canadian) gains. Canola closed with gains every session for the week, as traders positioned themselves ahead of Statistics Canada’s production estimate.
Dec. 3 cash canola bids in Velva, N.D., were at $14.49 per hundredweight.
Sunflowers
As of Nov. 15, 88 percent of the nation’s sunflower crop was harvested, compared with 88 percent the previous week and 84 percent for the five-year average. For the week ending Nov. 29, USDA estimated the export sales pace for soybean oil at 5.3 thousand metric tons. Dec. 3 cash sunflower bids in Fargo, N.D., were at $17.35 per hundredweight.