USDA report a mixed bag
Wheat: slow exports push wheat lower The wheat markets had losses of 30 to 45 cents last week. The December U.S. Department of Agriculture report increased ending stocks because of weak exports. The Minneapolis market had the lighter losses of 30...
Wheat: slow exports push wheat lower
The wheat markets had losses of 30 to 45 cents last week. The December U.S. Department of Agriculture report increased ending stocks because of weak exports. The Minneapolis market had the lighter losses of 30 cents because of stronger demand for quality spring wheat.
All three of the wheat exchanges started the week Dec. 10 with losses of 5 to 10 cents. Selling was tied to position squaring ahead of the Dec. 11 USDA crop production report. Additional selling was tied to the disappointing export shipments report. Traders have been expecting to see U.S. wheat exports increase as Black Sea wheat becomes harder to acquire, but so far, that has not been realized.
On Dec. 11, wheat opened the session lower and extended session losses throughout the session because of the bearish USDA December crop production report. Early estimates for the report had wheat stocks increasing 14 million bushels, because of a small cut in exports. But instead, USDA cut wheat exports by 50 million bushels, which followed through to show up as an increase in stocks of the same amount. With this change, wheat's ending stocks are now estimated at 754 million bushels, 11 million higher than last year's ending stocks estimate. To make matters worse, world wheat stocks also increased, jumping 2.82 million metric tons to 177 million metric tons. Most traders also were expecting to see production cuts in parts of the Black Sea countries, as well as Australia. Instead, the Black Sea saw no changes, while Australia's production increased 1 million metric tons to 22 million metric tons.
All three of the wheat exchanges continued to trade with losses on Dec. 12 and 13, with single-digit losses posted both days. The bearish USDA report continued to pressure the markets as exports continue to lag. Export sales were actually a little better last week, but shipments still are lagging behind.
The Dec. 14 trade brought single-digit gains to the wheat markets, with March Minneapolis trading back above $9. Strength in the row crop markets, weakness in the dollar, and end-of-week profit taking contributed to the small gains.
USDA reported wheat export inspections for the week ending Dec. 7 at 13.9 million bushels. This brings the year-to-date export inspections pace to 475.4 million bushels, compared with 550.4 million at this time last year. With 25 weeks left in wheat's marketing year, shipments need to average 24.98 million bushels to make USDA's projection of 1.1 billion. Wheat export sales pace for the week ending Dec. 7 was estimated at 19.1 million bushels. This brings the year-to-date export sales pace for wheat to 625.2 million bushels, compared with 685.5 million for last year. With 25 weeks left in wheat's marketing year, sales need to average 18.99 million bushels to make USDA's projection of 1.1 billion.
Corn: USDA report shows no changes
The lack of demand combined with sharp losses in the wheat complex to pressure corn. Exports and ethanol demand remain sluggish as the market searches for fresh news. For the week ending Dec. 13, December corn dropped 20 cents.
Corn was under pressure to start last week. The Dec. 10 session saw pressure from position squaring ahead of the Dec. 11 USDA report. Additional weakness came from another poor export inspection report, which was a new marketing year low for corn shipments. Corn slipped slightly Dec. 11 as a result of spillover from the sharp losses in the wheat complex. USDA's December report was considered neutral for corn, as USDA left all of corn's estimates unchanged. USDA left ending stocks at 647 million bushels (trade expected stocks to increase to 663 million) and the stocks to use ratio at 5.8 percent. World ending stocks for 2012 to '13 came in at 117.61 million metric tons versus November estimates of 117.99 million metric tons. Argentina corn production was cut to 27.50 million metric tons versus trade estimates of 26.02 million metric tons. Chinese corn production jumped a whopping 8 million metric tons to 208 million metric tons, but feed usage also was revised up by 8 million metric tons.
Corn traded with red ink again Dec. 12, with the weakness in the wheat market and the lack of demand the main reason for the pressure. News that South Korea's largest feed maker bought 238,000 metric tons of corn from South America added pressure. The ethanol report was also disappointing. Selling pressure continued Dec. 13, as corn traded to major support levels.
Ethanol production for the week ending Dec. 7 averaged 824,000 barrels per day, which is down 1.3 percent from the previous week and down 12.2 percent from last year. Total ethanol production for the week was 5.8 million barrels. Corn used in production the week ending Dec. 7 is estimated at 86.5 million bushels and needs to average 86.6 million bushels per week to meet this crop year's USDA estimate of 4.5 billion bushels. Ethanol stocks as of Dec. 7 were 20.02 million barrels, which is up 3.6 percent from the previous week and up 17.4 percent from last year.
USDA's export inspection report was bearish for corn. There were 7.9 million bushels of corn reported shipped, well below the 24.1 million needed to meet USDA's projection of 1.15 billion.
Soybeans: strong exports push beans higher
January soybeans gained more than 20 cents last week. Export sales and shipments continue to be very strong, running well ahead of the pace needed to meet USDA projections. The South American weather forecast continues to impact soybean futures, as well.
Soybeans opened the week Dec. 10 with light losses, but were able to post gains by the end of the day. Demand for soybeans remains strong, particularly from China, providing underlying support. The Dec. 10 export inspections were somewhat bullish, coming in on the lower end of expectations, but well above the amount needed to keep pace with USDA's projection.
Soybeans were higher early Dec. 11 on support from the slightly bullish supply and demand report. U.S. carryover came in below expectations and global carryover came in higher than expected. U.S. carryover was pegged at 130 million bushels, compared with 135 million expected and 140 million in November. Global carryover was 59.93 million metric tons, compared with 59.41 million metric tons expected and 60.02 million metric tons in November. Weakness in wheat futures weighed on the market later in the session, leading to the slightly lower close. USDA announced a sale of 115,000 metric tons of soybeans to China Dec. 11.
The soybean market traded narrowly mixed through much of Dec. 12 and 13, with nearby contracts closing slightly higher, while deferred contracts posted small losses. Demand continues to support the market and positive Chinese crush margins indicate the demand will continue. Pressure comes from the mostly favorable South American forecast. The Dec. 13 export sales were impressive again, coming in well above the amount needed to keep pace with USDA's projection.
Dec. 14 trade brought stronger gains into the market with light support from outside markets. Domestic crush continues at a healthy pace, which will work alongside strong exports to put the U.S. soybean supply in question.
USDA reported soybean export inspections pace for the week ending Dec. 7 at 46.6 million bushels. This brings the year-to-date export shipments pace for soybeans to 647.9 million bushels, compared with 459.1 million for last year at this time. Soybean export sales pace was estimated at 48.5 million bushels, bringing this year's total to 1.09 billion bushels, compared with 827.5 million last year at this time.
USDA reported no barley export inspections for the week ending Dec. 7. This brings year-to-date export shipments to 5.57 million bushels, compared with 5.61 million for last year at this time. There was no barley export sales reported, with the year-to-date export sales pace at 5.6 million bushels, compared with 3.8 million for last year at this time. Dec. 13 cash barley bids in Minneapolis had feed barley at $5.30 per bushel, while malting barley bids were at $7.20.
USDA reported no export inspections of durum for the week ending Dec. 7. Durum export sales pace was estimated at 700,000 bushels. This brings the year-to-date export sales pace to 13.2 million bushels, compared with 13.7 million for last year. Dec. 13 cash bids for milling quality durum were at $8.25 per bushel in Berthold, N.D., while Dickinson, N.D., bids were down to $7.90.
Canola futures on the Winnipeg, Manitoba, exchange had little net change last week. There were losses during the first half of the week from weakness in other grain markets and strength in the Canadian dollar. By the end of the week, canola had recovered its losses with support from a rallying soybean market and some retraction in the Canadian dollar. Farmer selling has been slow, as well, adding support. January canola traded below the 20-day moving average on Dec. 12, but had recovered by Dec. 14 to be trading back near $600 (Canadian) per ton in the January contract. Cash canola bids in Velva, N.D., were at $27.75 per hundredweight on Dec. 13.
Soybean oil export sales pace for the week ending Dec. 7 was estimated at 30.5 trillion metric tons. Cash sunflower bids in Fargo, N.D., were at $21.75 per hundredweight on Dec. 13.
Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach Grabanski at (800) 450-1404.