Strong market for old crop corn

Wheat: choppy trade after snowstorm The wheat markets had net losses of up to 7 cents last week. The Chicago market had support from the corn market, while the Kansas City market tried to overcome pressure from another round of snowfall on the So...

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

Wheat: choppy trade after snowstorm

The wheat markets had net losses of up to 7 cents last week. The Chicago market had support from the corn market, while the Kansas City market tried to overcome pressure from another round of snowfall on the Southern Plains.

The wheat markets started the week with losses on Feb. 25. When the Southern Plains received another round of heavy snow last week, the winter wheat markets came under heavy selling pressure and Minneapolis followed suit. By Feb. 26, the bearish response to the snowfall had already run its course. The Kansas City market actually had the strongest gains on Feb. 27 and 28. Reports from the areas with the heavy snowfall stated that the extreme winds accompanying the storm had left little snow on the actual fields, depositing it in the fence rows and tree rows instead.

Chicago wheat is now priced as a feed grain and followed corn higher after corn made a run to close back above $7 last week. Despite the recent strength in the U.S. dollar, export interest in wheat should be picking up. U.S. wheat is priced competitively on the world market, in both the milling and the feed markets. Japan and Taiwan are actively looking for milling wheat, so we should see some demand support across the wheat complex. The wheat markets have been oversold and last week's trade seems to have found some footing, despite the six-month highs in the dollar index.

The U.S. Department of Agriculture's wheat export inspections for the week ending Feb. 22 was estimated at 21.2 million bushels, with the year-to-date pace at 668.2 million bushels, compared with 726.3 million for last year at this time. With 14 weeks left in the marketing year, shipments need to average 26.4 million bushels to make USDA expectations of 1.05 billion.


USDA reported export sales of 13.7 million bushels, below the 15.3 million needed to keep pace with projections. Shipments of 21.5 million were below the 29.3 million needed.

Corn: strong cash market

The corn market was up 22 cents in the May contract for last week, as of noon on March 1. Corn created some buying interest last week, finding support from a strong cash market. Thoughts that exports will pick up and ethanol production will ramp up into spring also offered support.

The corn futures traded on both sides of unchanged on Feb. 25 and ended mixed. Spread trading came into play with buying of old crop and selling new crop. There was widespread rain in Argentina and more moisture falling in the Western Plains states that will drift east. The export inspections were disappointing and limited buying interest. March corn is now at a premium to the Chicago wheat and the basis is stronger for corn, meaning more wheat may go into feed rations.

The futures rebounded the rest of the week with the old crop contracts climbing back above $7. A fresh export sale of 127,000 metric tons to an unknown destination Feb. 25 created buying interest. Ethanol plants were also noted buyers for spring and summer delivery and traders expect production to ramp back up. The strong cash market for corn and a sharply higher soybean trade last week offered support. There was also some short covering into the end of the month.

New crop corn continues to struggle with higher production estimates for the 2013 U.S. crop. Brazil is looking to have a large crop, with 24 percent of it harvested and 47 percent of the second crop planted. Crude oil stocks are also at their highest level since 1983.

Ethanol production for the week ending Feb. 22 averaged 812,000 barrels per day, up 1.9 percent from the previous week, but down 9.4 percent from last year. Corn used in production the week ending Feb. 22 is estimated at 85.3 million bushels, but needs to average 87.7 million bushels per week to meet this crop year's USDA estimate of 4.5 billion bushels. Stocks as of Feb. 22 were 19.4 million barrels, which is down 0.6 percent from the previous week and down 11.9 percent from last year.

USDA's export inspections report was bearish for corn. There were 11.5 million bushels shipped, below the 20.1 million needed each week to meet USDA projections. The export sales report for corn was at 11.9 million bushels, below the 12.1 million needed to meet USDA's projection of 900 million bushels. Total shipments for the week ending Feb. 22 were at 11.7 million bushels, below the 19.8 million needed for the 2012 to '13 marketing year.


Soybeans: strong exports resume

May soybeans lost 7 cents last week, while November 2013 soybeans were 10 cents lower. Soybean futures have come under pressure from the beginning of the South American harvest, and expectations for larger U.S. production in 2013.

The soybean market closed lower on Feb. 25 and 26 as a result of a negative technical outlook and pressure from South American weather. Rain in Argentina was better than expected. Additional pressure comes from the ongoing Brazilian harvest. Feb. 25 export inspections were below expectations, but well above the amount needed to keep pace with USDA's projection.

Soybeans traded higher throughout the day Feb. 27. Though the Brazilian harvest is nearing one-third complete, movement of Brazilian soy has been hindered by logistics and quality concerns. Weather in South America is somewhat mixed, with rain in Argentina, followed by a return to a dryer pattern. Feb. 28 saw strong commercial buying tied to good old crop demand sparked an early rally to 30 cents before backing off to finish with 16.75-cent gains in the March contract. Feb. 28 export sales came in well above the amount needed to keep pace with USDA's demand projection.

March 1 trade brought losses back into the soybean market. This has been a pattern in recent weeks, with traders taking some weather premium out of the market ahead of the weekend, with rain forecast for Argentina. Outside markets were negative as well, which added pressure.

USDA reported soybean export inspections pace for the week ending Feb. 22 at 27.3 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.107 billion bushels, compared with 875.2 million for last year at this time. Soybean export sales pace for the week ending Feb. 22 was estimated at 25.3 million bushels, bringing this year's total to 1.271 billion, compared with 1.06 billion last year at this time. Shipments were reported at 30.2 million bushels.


USDA reported no new export inspections for barley last week. Year-to-date export inspections for barley stand at 5.62 million bushels, compared with 5.89 million last year. USDA reported export sales of 46,000 bushels and shipments of 4,600 bushels of barley, all to Taiwan. Feb. 25 cash feed barley bids in Minneapolis were at $5.20 per bushel, with malting barley bids at $7.10.



USDA reported no export inspections for durum last week. USDA reported no new export sales or shipments last week, with year-to-date sales at 16 million bushels, up from 15.1 million at this time last year. Cash bids for milling quality durum on Feb. 28 were at $7.80 per bushel in Berthold, N.D., and $7.75 in Dickinson, N.D.


Canola futures on the Winnipeg, Manitoba, exchange had losses of $3 to $5 (Canadian) per ton last week. The new crop market held the smaller losses, with support found from the need to replenish stocks in the 2013 crop year. Futures spreads have become less bullish in the old crop months and exports have slowed, but domestic crush demand remains strong. The weaker Canadian dollar has lent support, but was overcome by pressure from losses in global oilseed markets. Cash canola bids in Velva, N.D., were at $27.75 per hundredweight on Feb. 28.


USDA reported export sales of 4.8 trillion metric tons of soybean oil, with shipments of 37.6 trillion metric tons. Total sales so far this year are at 809.1 trillion metric tons, way up from 272.6 trillion last year. Cash bids for NuSun sunflowers in Fargo, N.D., were at $22.05 per hundredweight on Feb. 28.

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