Corn: large 2012 production forecast
The corn market lost 5 cents in March and 15 cents in December last week. Corn continued to trade in its sideways pattern. The market found support from fresh export sales along with tight ending stocks, while the new crop market is finding pressure from larger acreage and yield estimates. The market has struggled to surpass resistance at $6.50 due to a lack of fresh news.
On Feb. 21, corn traded under pressure with reports of rain in Argentina. The market also lacked any new buying interest and profit-taking added pressure. Export inspections were at the upper end of expectations. On Feb. 22, corn opened lower but quickly climbed into positive territory with renewed commercial and noncommercial buying. The futures also found support from fresh export sales. Private exporters reported to the U.S. Department of Agriculture that 120,000 million metric tons of U.S. corn was sold to China for the 2011 to '12 season. In addition, sales of 110,744 million metric tons of U.S. corn were sold to unknown destinations for the 2011 to '12 season. Japan also locked in 1.8 million metric tons of U.S. corn for 2011 to '12 delivery. The ethanol report was also good and added support, although stocks are growing.
News from the USDA Agricultural Forum 2012 limited any upside movement in the market on Feb. 23 and 24. USDA economist's left the planted acres at 94 million for the new crop season with a yield of 164 bushels per acre. Ending stocks are estimated at 1.616 billion bushels versus 801 million this year and stocks/usage jumps to 12 percent from 6.3 percent this season. A growing stocks estimate is pressuring new crop contracts.
Ethanol production for the week ending Feb. 17 averaged 919,000 barrels per day. This is down 0.97 percent versus the previous week and up 3.5 percent versus last year. Corn used in the week ending Feb. 17 production is estimated at 97.89 million bushels. Corn use needs to average 94.3 million bushels per week to meet this crop year's USDA estimate of 5 billion bushels. Stocks were 21.54 million barrels, which is up 0.22 percent versus the previous week and up 11.32 percent versus last year and another new high.
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Wheat: stocks projected to be ample
The wheat markets had losses of 10 to 30 cents last week. The Chicago market had the lightest losses as it continues to trade on par with the corn market. The Minneapolis market had the steepest losses this week as projections for higher acreage put pressure on the spring wheat market.
Wheat started the week on Feb. 21 by opening 6 cents lower in Chicago due to a sell-off in the corn market. Outside markets were supportive with gains in the stock markets and losses in the dollar index, but focus was on the expected bearishness of the USDA Outlook Forum and poor ethanol margins in the corn market. Rain in key growing areas of the U.S. winter wheat belt pressured the Kansas City market.
On Feb. 22, wheat opened with light losses but quickly turned higher as buying interest entered the corn and winter wheat markets. There were thoughts that Feb. 21 losses were overdone, and the strong basis indicates strong demand for wheat in the near term. While near term fundamentals are appearing more positive, the longer term outlook remains bearish with large world stocks and potential for higher U.S. production. Winter wheat crop ratings in Texas came in at 32 percent good to excellent last week, up from 29 percent the previous week. The percent of crop rated poor to very poor dropped from 40 percent to 36 percent.
Wheat opened with light losses on Feb. 23 but ground lower throughout the day despite support from the losses in the dollar index. The USDA Outlook Forum projected 2012 wheat acreage at 58 million acres, up by 1.5 million from the baseline projections, and 3.6 million more than last year's acreage. The higher acreage projections weighed heavily on the Minneapolis market. The U.S. has been able to sell some wheat to Spain as a result of the export bottlenecks out of the Black Sea region, but the International Grains Council raised its global wheat ending stocks projection to a new record level once again.
On Feb. 24, trade brought further pressure into the wheat markets despite losses in the dollar index. The USDA Outlook Forum numbers continue to weigh on the wheat markets, with projections for ample stocks in years to come. Export sales were strong last week, raising hope for future decreases in stocks.
Soybeans: acreage battle
Soybeans gained 5 to 20 cents last week. Commercial traders remain bullish with nearby contracts experiencing larger gains last week than the deferred. Expect new crop soybeans to remain firm relative to corn because of the need to secure acreage for the 2012 growing season.
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Soybeans opened higher on Feb. 21 before dropping into the red on pressure from a more negative South American weather forecast and weakness in the other grains. Buying interest from both sides of the market indicates a strengthening of the short-term uptrend. Fund traders bought soybeans ahead of the USDA Outlook Forum. The report of a sale of 250,000 metric tons of U.S. soybeans to China provided support.
Technically over-bought conditions left the soybean market susceptible to a short-term sell-off on Feb. 22, resulting in a lower open and negative trade through most of the day.
This negative trade persisted throughout the session despite a strong rally in the other grains, though spill-over interest lifted soybeans to slight gains on the close. The improving weather forecast for South America pressured soybeans early, but talk of a drier forecast for southern Brazil later in the session provided some support. We should see the longer-term seasonal rally extend itself, as commercial outlook remains bullish. USDA confirmed a sale of 250,000 metric tons of soybeans to China.
Outside markets were supportive on Feb. 23 as soybeans opened higher and climbed to gains of 4.5 cents. The weaker U.S. dollar supported, as did gains in gold and the equity markets. March soybeans were able to hit another new high at $12.80, showing strength in the short-term uptrend. Additional support came from continued talk of smaller South American crops and more dryness for southern Brazil. The USDA lowered its South American production estimate by 2.5 million metric tons in the February update. Chinese new crop commitments set a new record at 13.4 million metric tons, up from 11.5 million metric tons last year. USDA projected soybean acres at 75 million, which was in line with expectations.
Soybeans traded higher on Feb. 24 with support from outside markets and continued demand for U.S. soybeans. Demand is expected to remain high because of tighter than expected South American supply. Soybeans' advance is limited by weakness in the wheat and corn markets.
Barley
USDA reported export inspections of 104,000 bushels of barley. The total pace is now at 5.9 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 $7.05 for malting barley.
Durum
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USDA reported export inspections of 85,000 bushels for durum last week. There was no new export sales reported last week. Cash bids for milling quality durum are in the $8 to $8.40 range.
Canola
Canola futures on the Winnipeg, Manitoba, exchange gained $8 (Canadian) per ton for the week in the March contract and $6 in the November contract. While the gains were not as strong as the previous week, buying interest continues to come from both commercial and noncommercial traders. There has been strong demand for canola both domestically and on the export market, and the gains have triggered technical buy orders as well. Cash canola bids in Velva, N.D., on Feb. 23 were at $26.57.
Sunflowers
Soybean oil export sales pace for the week ending Feb. 17 were estimated at 25.2 trillion metric tons, bringing the year-to-date total to 267.8 trillion metric tons, down from last year's torrid 1,099.7 trillion metric tons. Cash sunflower bids in Fargo, N.D., on Feb. 23 were at $26.
Dry beans
Dry bean markets remain firm, with prices leveling off after seeing large increases into 2012. USDA is reporting cash bids of $48 for pintos and $45 for navies and blacks, reaching producer price targets. Crop insurance prices for 2012 have been set at $44 for pintos and navies, and $42 for blacks. The new crop insurance prices have essentially guaranteed substantially larger acreage for the 2012 crop year.
Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach Grabanski at (800) 450-1404.
