Wheat: slow exports weigh on futures
The wheat markets had losses of 10 to 20 cents last week. Pressure came from a recovery in the U.S. dollar and a general negative tone for commodities. The Kansas City market had the larger losses because of forecasts for moisture.
Wheat markets started Feb. 4 with light gains from the rallying soybean market, but came under pressure by the end of the day. A weekend sale of U.S. wheat to Egypt was positive, but was overshadowed by another round of poor export inspections numbers. Weekend forecasts for rain in some of the hard red wheat belt added a negative tone. Losses continued Feb. 5, with large stocks of wheat in India looming over the wheat market. The new Statistics Canada report pegged Canadian ending stocks for 2012 at 20.7 million tons, down 0.7 percent from a year ago, which was friendly for the wheat market.
Wheat was able to trade with gains on Feb. 6, despite pressure from the continued rally in the U.S. dollar. Rain was forecast for much of the hard red wheat belt, but the weather returns to dry patterns after that. Wheat markets came under pressure on Feb. 7 because of sharp gains in the dollar index and disappointing export sales. A sale of spring wheat to Japan did help support the Minneapolis market.
The Feb. 8 U.S. Department of Agriculture report surprised the market with a 25 million bushel cut in ending stocks. This was a result of a 25 million-bushel increase in domestic feed and residual use. The market responded by jumping sharply higher initially, but soon slipped lower as a result of the fact that exports continue to lag, and USDA has not accounted for that fact yet. By noon on Feb. 8, wheat was trading back near unchanged.
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USDA reported wheat export inspections pace for the week ending Jan. 31 at 15.2 million bushels. This brings the year-to-date export inspections pace to 599.8 million bushels, compared with 674.7 million at this time last year. With 17 weeks left in wheat's marketing year, shipments need to average 25.9 million bushels to make USDA's projection of 1.05 billion. Wheat export sales pace for the week ending Jan. 31 was estimated at 10.7 million bushels. This brings the year-to-date export sales pace for wheat to 771.5 million bushels, compared with 822 million for last year. With 17 weeks left in wheat's marketing year, sales need to average 16.1 million bushels to make USDA's projection of 1.05 billion.
Corn: increase ending stocks
The corn market was down 22 cents in the March contract for last week, as of noon on Feb. 8. Pressure came from estimates of a record corn crop in Brazil and large production estimates for the 2013 U.S. crop, as well as the slow pace for exports of our 2012 corn crop.
Corn traded under pressure and closed lower for the first four days of the week. There was some support on Feb. 4 from the strength in the soybean market and disappointing rain over the weekend in Argentina. Dry weather persists in areas of Argentina and the next week looks the same. The corn futures turned lower by midmorning on Feb. 4 and closed lower with another poor export inspections report.
Losses continued on Feb. 5, 6 and 7 with profit taking, as traders looked ahead to the Feb. 8 USDA supply and demand report. The weekly ethanol report was disappointing and no surprise with constant news of plants that continued to be idled throughout the U.S. Cash markets for old crop corn are strong, but it appears that rationing of the 2012 corn crop will be performed by the cash market, not the futures.
In the Feb. 8 report, USDA raised corn ending stocks to 632 million bushels, which was an increase of 30 million over last month and 15 million more than estimated. Corn exports were lowered by 50 million bushels, while food, seed and industrial was increased by 20 million. Ethanol usage was left alone, a surprise to the market. The projected ending stocks number of 632 million bushels is still the lowest number since 1996, which was 426 million bushels. Global corn stocks were raised 2 million metric tons, while estimated South American production remained unchanged with a slight increase in Brazil production and a slight decrease in Argentina production. Trade was choppy on Feb. 8 after the release of the report.
Ethanol production for the week ending Jan. 31 was reported at 774,000 barrels per day, down a whopping 16.10 percent from last year. Corn used in production for the week ending Jan. 31 is estimated at 81.3 million bushels and needs to average 87.3 million bushels per week to meet this crop year's USDA estimate of 4.5 billion bushels. Stocks as of Feb. 1 were 20.1 million barrels, which was down 2.2 percent from the previous week and down 4.6 percent from last year.
USDA's export inspections report was bearish for corn. There were 5.3 million bushels of corn reported shipped, below the 20.8 million needed to meet USDA's projection of 950 million for the 2012 to '13 marketing year. The export sales report for corn was at 6.6 million bushels, below the 13.5 million needed to meet USDA's projection of 950 million. Total shipments for the week ending Jan. 31 were at 8.2 million bushels, below the 20.6 million needed for the 2012 to '13 marketing year.
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Soybeans: weather worries
March soybeans were down 3 cents last week, while November 2013 soybeans were 30 cents lower. South American weather continues to have a strong impact on the market. The new crop market was pressured by losses in new crop corn, with traders pulling some weather premium out of the 2013 market.
The soybean market closed with double-digit gains Feb. 4 after unimpressive rains in dry areas of Argentina over the weekend. Demand remains supportive for soybeans as a sale of 116,000 metric tons to China was announced. The soybean market closed higher again Feb. 5 as the South American weather forecast remained generally dry in the south and wet in the north last week. The Feb. 5 Statistics Canada report showed total Canadian soybean stocks down 6.7 percent to 2.4 million metric tons, despite a 14.7 percent production increase in 2012.
The soybean market closed lower on Feb. 6 and 7 on profit taking, sparked by a wetter extended forecast for dry portions of South America. Traders were also positioning ahead of the USDA supply and demand report.
USDA released its February World Agricultural Supply and Demand Estimates report Feb. 8. U.S. ending stocks for soybeans were 125 million bushels, compared with 129 million expected and down from 135 million last month. Global ending stocks were 60.12 million metric tons, compared with 59.22 million metric tons expected and up from 59.46 million last month. USDA numbers were mixed, but the markets traded sharply lower after the report. USDA has still not raised export projections for soybeans, which we expect in future reports.
USDA reported soybean export inspections pace for the week ending Jan. 31 at 53.9 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.004 billion bushels, compared with 758.3 million for last year at this time. Soybean export sales pace for the week ending Jan. 31 was estimated at 32.9 million bushels, bringing this year's total to 1.257 billion million, compared with 986.8 million last year at this time.
Barley
USDA reported export inspections of 8,000 bushels for barley for the week ending Jan. 31. Year-to-date exports are at 5.59 million bushels, compared with 5.69 million at this time last year. The Statistics Canada report pegged 2012 ending stocks for Canadian barley at 5.1 million tons, down 7.2 percent from 2011. There were no new export sales, but 14,000 bushels were shipped to Taiwan. USDA cut export projections by 1 million bushels, putting ending stocks at 76 million. Ending stocks were 60 million bushels last year and 89 million the year before. Feb. 7 cash barley bids in Minneapolis had feed barley at $5.20 per bushel, while malting barley bids were at $7.05.
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Durum
USDA reported export inspections of 698,000 bushels for the week ending Jan. 31. The Statistics Canada report pegged 2012 ending stocks for Canadian durum down 4.1 percent from 2011. Export sales of 700,000 bushels were reported, with shipments of 700,000 bushels. Year-to-date sales are at 16.8 million bushels, up from 15.1 million at this time last year. Feb. 7 cash bids for milling quality durum were at $8 per bushel in Berthold, N.D., and Dickinson, N.D.
Canola
Canola futures on the Winnipeg, Manitoba, exchange continued the recent uptrend to post net gains of up to $18 (Canadian) per ton for the week. Statistics Canada confirmed the tight supply and demand situation, pegging 2012 ending stocks for Canadian canola at 7.4 million tons, down 23.6 percent from 2011, and the lowest level since 2006. Strong commercial support has been evident, with the nearby contract having the largest gain as the market grows more bullishly inverted. The weaker Canadian dollar has been supportive, as well. This market has gained more than $60 (Canadian) per ton in the past month, and is becoming extremely overbought. Weakening cash basis on the prairies may be hinting at less support for this rally to continue. Cash canola bids in Velva, N.D., were at $29.16 per hundredweight on Feb. 7.
Sunflowers
Soybean oil export sales pace for the week ending Jan. 31 was estimated at 25.5 trillion metric tons. This brings the year-to-date total to 758.8 trillion metric tons, compared with last year's 221.6 trillion. USDA increased soybean oil production estimates by 275 million pounds and increased exports by 150 million, putting ending stocks up 125 million, or 8 percent. Cash sunflower bids in Fargo, N.D., were at $22.60 per hundredweight on Feb. 8.
