Planting progresses

Wheat: conditions improve

All three wheat exchanges struggled last week but most of the issues were in the winter wheat exchanges while Minneapolis experienced modest gains. The winter wheat exchanges were under pressure throughout last week in response to improving crop conditions and from forecasts for continued ideal growing conditions. Minneapolis continued to see buying interest from the friendly U.S. Department of Agriculture's prospective planting report, which was released on March 30. For the week ending April 4, May Minneapolis wheat gained 8.25 cents, May Chicago slipped 21.5 cents, and May Kansas City dropped 28 cents.

Wheat started the short Easter week mixed with Minneapolis gaining the most ground prompted by a lower than expected acreage estimate on March 30. The winter wheat contracts were under pressure because of improving crop conditions and from weather forecasts that continue to call for ideal weather conditions for crop development.

The wheat exchanges traded in a lackluster fashion April 3 as the market searched for news to give it direction. The news that is starting to surface is becoming more bearish to winter wheat as conditions continue to improve and weather conditions continue to favor ideal growing conditions in the Southern Plains. Even the Northern Plains are seeing good conditions as producers are off to one of the earliest and best starts in recent history. If this pace continues, it appears that the winter wheat production potential is going to be large and that will lessen the need for additional spring wheat acreage.

Wheat started the session lower April 4 with pressure continuing to come from ideal weather conditions for wheat development in both the U.S. and Europe. The Southern Plains states continue to see good growing conditions. To top that off, the Northern Plains weather has been as close to ideal as one can get with warmer than expected temps allowing for one the earliest starts to the planting season. All of that is adding up to a potential large U.S. wheat crop. Informa estimated the 2012 winter wheat crop at 1.631 billion bushels, an increase of 135 million bushels from last year. The increase in production was due to an increase in both planted acreage (from USDA's March expectations) and from an increase in yield, which is now expected to be higher than trend.

USDA's weekly crop condition rating report estimated the U.S. winter wheat crop at 58 percent good to excellent, 30 percent fair and 12 percent poor to very poor compared with 37 percent the previous week. The major states report crop condition as: Colorado: 41 percent good to excellent, 38 percent fair and 21 percent poor to very poor, an increase of 5 percent from the previous week; Kansas: 60 percent good to excellent, 32 percent fair and 8 percent poor to very poor, an increase of 1 percent from the previous week; Oklahoma: 75 percent good to excellent, 19 percent fair, and 6 percent poor to very poor, unchanged from the previous week; and Texas: 34 percent good to excellent, 33 percent fair and 33 percent poor to very poor, a decrease of 5 percent from the previous week. As of April 1, 8 percent of the nation's spring wheat has been planted compared to 0 percent the previous week and 2 percent for the five-year average.

Corn: tight old-crop stocks

The corn market traded higher for the Easter shortened first week of April, with the May contract up 16 cents while December gained 10 cents. The crop report March 30 came out with smaller stocks and that created buying interest in old-crop contracts. Buying interest in new-crop contracts was limited with an increase in estimated acres to be planted and planting progress near record pace. Early planted crops also tend to produce larger yields. Traders are looking ahead to the April 10 USDA production and supply/demand report to see verification of where USDA will adjust corn demand (due to the 150-million-bushel cut in quarterly grain stocks).

Buying interest carried over from March 30 to support old-crop contracts early last week. Support came from tighter-than-expected stocks in the March 30 quarterly grain stocks report, which created bull spreading between the old- and new-crop contracts. The lack of farmer selling and an improving basis is also supporting the front months. Additional support came from the Argentina grain exchange as it estimates its 2011 to 2012 corn crop at 19.7 million metric tons, which is down slightly from its previous estimate and down from the March USDA estimate of 22 million metric tons.

The last two trading days of last week saw the market close near unchanged as buying interest dried up. The early spring and the largest estimated acreage to be planted in 75 years limited upside movement in new-crop contracts. Also, the International Grains Council estimated world corn production for 2012 to 2013 at 900 million metric tons, which is higher than demand for the first time since 2008 to 2009. The group sees world ending stocks increasing to 129 million metric tons compared with 122 million metric tons this season.

Ethanol production for the week ending March 30 averaged 873,000 barrels per day, which is down 1.8 percent versus the previous week and down 3.2 percent versus last year. Total ethanol production for the week ending March 30 was 6.111 million barrels. Corn used in ethanol production for the week ending March 30 was estimated at 92.99 million bushels. USDA's export inspection report was neutral for corn. There were 31 million bushels of corn reported shipped, below the 33.9 million bushels needed to meet USDA's projection of 1.7 billion bushels.

Soybeans: solid gains in short week

Soybeans were up 20 to 40 cents in the short week. New-crop soybeans will remain strong relative to corn in hopes of securing acreage, but it may be too late to do much good. Chinese demand is expected to stay strong in the near term, though some question how long the pace can be maintained.

May soybeans opened higher April 2 and quickly climbed on follow-through buying from March 30. New crop led the way as concerns over tightening global stocks continued. The new crop gained sharply versus corn as it continued to try to switch acres to soybeans. If soy fails to gain enough acres, it could project a negative carryout. Outside markets were negative early, but turned more positive into midday. The March 30 export inspections report was bullish, coming in at more than double the amount needed to stay on pace with USDA's projection. USDA announced a sale of 120,000 metric tons of old-crop soybeans to China.

On April 3, May soybeans opened lower and moved into positive territory early in the session. Follow-through buying and strength in the corn market were supportive early. The May and November contracts were able to hit new highs before the market turned downward as negative outside markets led to long-liquidation selling. South American production estimates continue to come in well below USDA's projections. Soybeans continued to be pressured to gain acreage relative to corn as many believe that global and domestic ending stocks are overstated.

Soybeans opened lower April 4 as negative outside markets pressured. Outside markets pressured soybeans overnight and throughout the day, with sharp losses in crude oil and the Dow Jones as well as solid gains in the U.S. dollar. Despite the negativity, soybeans were able to trade higher through most of the session, and closed with gains in the old crop. Additional private projections for smaller crops from South America were supportive. Traders still see a need for soy to gain relative to other crops to gain acreage, but there is some talk of corn seed being exchanged for soybeans, and that put pressure on new-crop beans.

Soybeans opened higher on March 5 as outside markets turned more positive. There is early support in the market from continued concern over South American crop losses. USDA's export sales report on March 5 was bullish, coming in significantly above the level needed to maintain the pace necessary to meet USDA's projections.

Barley

As of April 1, 8 percent of the nation's barley crop had been planted compared with 0 percent the previous week and 4 percent for the five-year average.

USDA estimated barley export inspections pace for the week ending March 30 at 72,000 bushels with 60,000 bushels going to Mexico and 12,000 bushels going to China. USDA reported no barley export sales for the week ending March 30.

Cash barley bids in Minneapolis increased 5 cents last week, putting feed barley bids at $5.20 while malting barley bids were at $7.05.

Durum

As of April 1, 4 percent of North Dakota's durum crop was planted compared to none the previous week and none for the five-year average.

USDA estimated durum export inspections pace for the week ending March 30 at 149,000 bushels. USDA reported 200,000 bushels of export sales for durum for the same week.

Cash bids for milling quality durum on March 4 were at $8.25 in Berthold, N.D., with Dickinson, N.D., at $8.40.

Canola

Canola futures on the Winnipeg, Manitoba, exchange ended last week $1.80 (Canadian) lower. Canola started last week with decent strength as all months were supported by a stronger U.S. soybean complex as well as from the March 30 USDA prospective plantings report. Late in the week, canola fell under pressure from technical selling. The prospect for large acreage this year in Canada also added pressure. Cash canola bids on April 4 in Velva, N.D., were at $27.95.

Sunflowers

The soybean oil export sales pace for the week ending March 30 was estimated at a negative 3.5 trillion metric tons (cancellation), bringing the year-to-date total to 331.3 trillion metric tons, down from last year's record 1135.2 trillion metric tons. Cash sunflower bids on April 4 in Fargo, N.D., were at $26.75.

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