Corn: USDA confirms lower stocks
The corn market lost 10 cents last week as there were no big surprises in the U.S. Department of Agriculture supply and demand report. Traders were expecting tighter stocks and an increase in exports, which did materialize and was built into the market. The futures came under pressure late last week as there was a lack of buying interest and unknown demand going forward for ethanol. Larger acreage estimates for 2012 also pressured new crop months.
For the first three days of last week, corn traded in a sideways pattern ahead of the Feb. 9 USDA supply/demand report. Traders expected lower U.S. ending stocks and higher exports, along with a drop in global stocks due to lower production estimates from South America. Traders were nervous that there may be a bearish surprise in the report and we saw some money going to the sidelines early last week. There was also more talk of slowing ethanol production. Average ethanol profit margins have been negative for five of the past seven weeks and the negative margins were the worst for the week ending Feb. 3 since June 2008. The new crop months also traded with some weakness as a private firm released its survey of analysts' estimates for 2012 planted corn acres. The average estimate was for 94.2 million acres versus the 91.9 million acres planted in 2011.
On Feb. 9, corn opened 2 cents lower and quickly firmed up to trade with 7-cent gains, but worked lower at midday and closed down 5.5 cents. The news maker was the USDA report. USDA did lower U.S. stocks to 801 million bushels, which is down from 846 million bushels last month. The offset was an increase of 50 million bushels for exports. USDA left Brazil's corn crop alone, but did lower Argentina's crop by 4 million metric tons, which also created a lower global stocks number. World stocks came in at 125.35 million metric tons, down from 128.14 million metric tons last month. Although the report was somewhat friendly for corn, traders expected it to be more bullish and the sharp break in the winter wheat markets pressured corn into the close.
Ethanol production for the week ending Feb. 3 averaged 923,000 barrels per day. This is down 1.7 percent versus the previous week and up 2.6 percent versus last year. Total ethanol production for the week was 6.461 million barrels. Corn used in production for the week ending Feb. 3 is estimated at 98.32 million bushels. Corn use needs to average 94.619 million bushels per week to meet this crop year's USDA estimate of 5 billion bushels. Weekly production was down to the lowest level since the week of Nov. 18. Stocks were 21.063 million barrels, which is up 0.56 percent versus the previous week and up 7.6 percent versus last year and another new all-time high.
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Wheat: report checks wheat markets
The wheat markets had losses of 12 to 30 cents last week. The Minneapolis market had the lightest losses due to strong commercial support. Wheat had been rallying based on undocumented winterkill in Eastern Europe, but the USDA report reminded traders of the large global stocks of wheat.
Wheat opened 3.5 cents higher in Chicago early on Feb. 6 and held mostly steady gains for the day. Cold temperatures in the Black Sea region and Eastern Europe supported wheat futures. While Russia has denied any rumors of export tariffs, exports have slowed from that region due to the cold weather, and the temperatures have traders concerned about the 2012 crop. Winter wheat in Kansas and Colorado received another round of moisture over the weekend, and India is projected to produce a record wheat crop, but traders' focus is on Eastern Europe right now.
Feb. 7 and 8 brought light pressure into the wheat markets. Wheat had traded up to the levels seen during the fall 2011 and found some technical resistance there. Cold temperatures persist in Eastern Europe, but the extent of damage to the wheat crop is unclear. Dryness in Western Canada has some traders concerned about 2012 spring wheat production, which drove Minneapolis to put in new five-week highs on continued commercial support. As traders prepared for the monthly USDA report, it appeared that most of the attention would be focused on South American crop sizes for corn and soybeans. Traders were expecting slight cuts to ending stocks for wheat in the Feb. 9 USDA report.
Wheat opened mixed on Feb. 9 but came under heavy noncommercial selling pressure as the day progressed. The February USDA supply and demand report showed a 25-million-bushel increase in U.S. export projections, lowering ending stocks by 25 million bushels to be at 845 million bushels. This was positive for the wheat market, but global ending stocks for wheat were revised upward by 3.08 million metric tons at 213.10 million metric tons, which is a record level. This brought heavy noncommercial selling into the wheat market. Wheat had rallied 90 cents in recent weeks due to weather scares in the former Soviet Union countries, but the global stocks report reminded traders of the ample world supplies of wheat. Losses continued on Feb. 10 due to noncommercial selling pressure. Sharp gains in the dollar index and technical pressure created steady losses of 5 to 10 cents on Feb. 10.
USDA reported wheat export inspections pace for the week ending Feb. 3 at 14.5 million bushels. This brings the year-to-date export shipments pace for wheat to 671.4 million bushels compared with 786.8 million bushels for last year. With 17 weeks left in the marketing year, shipments need to average 16.3 million bushels to keep pace with USDA projections.
Soybeans: quiet week
Soybeans lost 5 to 20 cents last week. The Feb. 9 USDA report was the main factor last week, and the market saw positioning before the report was released, followed by reaction to the report to close the week.
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On Feb. 6, soybeans opened up 5.25 cents and climbed to within 1 cent of the January high before sliding back to close slightly up. The outside markets were generally negative, with metals and crude oil sharply down. Pressure was provided by a positive U.S. dollar as well. Some speculative support was provided by the idea that a smaller South American crop could increase demand for U.S. soybeans. The weekly export report was bullish as inspections came in slightly above expectations.
Soybeans closed down 1 cent on Feb. 7 and down 0.5 cents on Feb. 8 as traders positioned ahead of the Feb. 9 USDA report. Positive outside markets on Feb. 7 and early Feb. 8 turned more negative as the day progressed. Feb. 7 saw support from expected reductions in South American production, while continued wetter weather in the forecast provided pressure on Feb. 8.
On Feb. 9, soybeans opened higher and traded above the January high early in the session before falling to end with 4 cent losses. The USDA report was fairly neutral with domestic carryover unchanged from last month's estimates at 275 million bushels. The report did decrease South American production expectations, which lowered global carry-over to 60.28 million metric tons, down from 63.43 last month. Weekly export sales were within expectations.
Follow-through technical selling provided pressure as soybeans traded lower early in the session Feb. 10. Outside markets were negative as well, as the U.S. dollar was higher and crude oil was sharply down.
Barley
USDA reported export inspections of 60,000 bushels of barley. The total pace is now at 5.7 million bushels compared with 4.5 million bushels for last year at this time. There were no new export sales for barley. Ending stocks are projected at 45 million bushels, down from 89 million bushels last year and 115 million bushels in 2009 to '10. Cash bids in Minneapolis were at $5.25 for feed and $7.05 for malting barley.
Durum
USDA reported export inspections of 141,000 bushels for durum last week. USDA made no changes to the ending stocks for durum at 23 million bushels, down from 35 million bushels last year. USDA reported export sales of 200,000 bushels for last week, bringing the pace to 15.1 million bushels, down from 30.6 million bushels at this time last year. Shipments of 200,000 bushels were also reported. Cash bids for milling quality durum are in the $8 to $8.25 range.
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Canola
Canola futures on the Winnipeg, Manitoba, exchange had gains of up to $9 (Canadian) per ton for last week. The monthly USDA supply and demand report showed a reduction in global oilseed stocks due to drought conditions in South America during December and January. While the soybean market sold off to finish last week, canola held gains with continued strong support from export demand and domestic crush demand. Cash canola bids in Velva, N.D., on Feb. 9 were at $25.24.
Sunflowers
Last week's soybean oil export sales pace was estimated at 22.2 trillion metric tons, a marketing year high. This brings the year-to-date export sales pace for soybean oil to 221.6 trillion metric tons compared to 1,083.9 trillion metric tons for last year at this time. USDA made no changes to ending stocks for soybean oil. Cash sunflower bids in Fargo, N.D., on Feb. 9 were at $25.60.
Dry beans
Dry bean markets remain firm with moderate activity in the pinto bean market. USDA is reporting pinto bids at $48 in the North Dakota/Minnesota region, reaching producer price targets. Prices are steady at $45 for navies and blacks.
Grabanski is president of Progressive Ag, a Fargo, N.D.-based hedge brokerage firm. Reach Grabanski at (800) 450-1404.
