USDA report surprises

Wheat: USDA report friendly

Wheat struggled last week, even with a friendly U.S. Department of Agriculture report. For the week ending April 12, May Minneapolis dropped 8.5 cents, May Chicago was 75 cents higher, and May Kansas City was off 9.5 cents. Rapid planting progress of spring wheat and a strong rated winter wheat crop overshadowed a friendly USDA crop production report.

Wheat opened last week mixed with the winter wheat contracts starting the session higher while Minneapolis slipped lower. The winter wheat contracts were supported by weather reports calling for cold temperatures for much of the Southern Plains. Kansas was reporting freezing temps in some northern locations, but so far most of the cold has not drifted into the most advanced crop development regions. Position squaring ahead of USDA's crop production estimate was also seen. USDA will release its latest April supply and demand estimates on April 17.

The April 10 session started softer than expected. Even though wheat's report numbers were friendly, wheat ran into a wall from the bearishness of corn's estimate. The market held onto gains until 11 a.m., but at that time it just seemed like the grains could do nothing right and a major sell-off moved in to pressure most commodities. With this report out of the way there is now little on the horizon that could be considered as supportive (earlier planting, improving crop ratings, steady demand) other than the potential of freezing temperatures (but only for the next 10 days).

Wheat traded the rest of last week with modest gains as traders tried to work in the numbers from a friendly USDA April supply and demand report. Additional support came from the April 12 USDA crop production report, which is estimating a potential increase in wheat feeding this summer. Wheat has been running equal to or slightly below corn for quite some time and USDA is expecting wheat to be used in more feed rations this summer because of its price discount to corn. The April 12 session saw light support from a sharply lower U.S. dollar. The winter wheat contracts were also supported by colder-than-expected forecasts. Minneapolis collapsed toward the end of the session caused by improving weather conditions in the Northern Plains as rain is moving into much of the northern regions.

USDA reported wheat export inspections pace for the week ending April 6 at 17.6 million bushels. The wheat export sales pace for the week ending April 6 was estimated at 19.9 million bushels with 16.6 million bushels being old crop while 3.3 million bushels were new crop. With eight weeks left in the marketing year, shipments need to average 19.4 million bushels and sales need to average 4.3 million bushels to keep pace with USDA's projection of 1 billion bushels.

USDA's April crop production report was friendly to wheat. In its report USDA decreased wheat's 2011 ending stocks estimate 32 million bushels. The decrease was because of a 3 million bushel decrease in seed demand (less acreage) and by a 35 million bushels increase in feed demand. The net change was a 32 million bushel reduction in ending stocks, which is now estimated at 793 million bushels. USDA made no changes to production estimates. World wheat stocks declined 3.31 million metric tons to now being estimated at 206.27 million metric tons. Most of the decrease in stocks was due to increases in feed demand.

Corn: pressured from USDA report

The corn market traded lower last week, with May down 20 cents and December off 4 cents. The April 10 USDA report was not friendly for corn and pressured the market. Rain was forecast for this week and was expected to delay planting, but warm and dry weather is forecast for the next week. Corn planting is running at a record pace and early planted crops tend to produce large yields.

Corn closed lower on April 9 because of profit-taking ahead of the April 10 USDA supply and demand report. The futures were down hard on April 10. Traders were estimating smaller stocks in the report and the results were not as expected. USDA left ending stocks for the 2011 to 2012 season unchanged at 801 million bushels, about 80 million bushels above trade expectations. Usage numbers were also left alone. USDA is expecting more wheat to be fed into the summer and also believes that new-crop corn will be available in August. World ending stocks were lowered slightly to 122.71 million metric tons from 124.53 million metric tons last month and 125.02 million metric tons last year. Brazil production was left unchanged and Argentina production was adjusted just slightly lower.

Corn firmed up and closed with small gains the last few trading days of last week as traders said early week losses were overdone. The jump in ethanol production last week, which was the first in the last four weeks, and a drop in ethanol stocks offered support. Additional support came from talk that China bought U.S. old-crop corn and a good export sales report. Traders also said that some of the early planted corn may have been hurt in the southern Corn Belt late in the week from freezing temperatures and that slowed down selling pressure.

Ethanol production for the week ending April 6 averaged 896,000 barrels per day. This is up 2.6 percent versus the previous week and down 0.22 percent versus last year. Total ethanol production for the week was 6.272 million barrels. Corn used in ethanol production for the week ending April 6 is estimated at 95.4 million bushels.

Soybeans: USDA report shapes week

New-crop soybeans will remain strong relative to corn in hopes of securing acreage, but it may be too late to do much good. Chinese demand is expected to stay strong in the near-term, though some question how long the pace can be maintained. For the week ending April 12, May soybeans are up 7 cents while November dropped 8.75 cents.

May soybeans opened last week unchanged but ran into profit-taking and positioning leading into the April 10 USDA report. Weak outside markets put pressure on soybeans as the energy and equity markets saw losses. The U.S. dollar started higher, but turned lower later in the session. New crop was able to post small gains as the market stays strong relative to new-crop corn and watches for signs of switching acres.

The April 10 USDA's April crop production report reduced U.S. and global ending stocks and revised demand higher. South American production estimates in Argentina and Brazil were also cut, which was expected by the trade. May soybeans opened higher and rallied to the highest level since Sept. 2, the second new high of the week. The report supported the early rally. Weakness in corn and negative outside markets caused soybeans to turn negative into midday. USDA announced a sale of 165,000 metric tons of soybeans to China for 2012 to 2013.

Soybeans opened higher on April 11 with support coming from the outside markets. Crude oil and the Dow were higher while the U.S. dollar dipped lower to support the higher open. Despite the positive outside markets, selling came in from both sides of the market, pushing soybeans to end with losses for the third consecutive session. Long liquidation selling was sparked by follow-through selling after the April 10 report, as well as talk that the market was overbought technically.

On April 12, soybeans opened higher and moved to double-digit gains early in the session. Outside markets were supportive, with strong gains in crude oil and the Dow, as well as solid losses in the U.S. dollar. Export news was friendly as well, with 55,000 metric tons of old-crop beans and 60,000 metric tons of new crop being sold to China. An additional 79,000 metric tons of old crop and 110,000 metric tons of new crop were sold to undisclosed locations. USDA's export sales report came in below expectations, but still nearly triple the amount needed to stay on pace with USDA's projection.

Barley

As of April 8, 15 percent of the nation's barley crop had been planted compared with 8 percent the previous week and 10 percent for the five-year average.

USDA estimated barley export inspections pace for the week ending April 6 at 8,000 bushels with all of the barley going to Mexico. There were no reported barley export sales for last week. USDA made no changes to barley's supply and demand estimates in its April crop production report.

Durum

As of April 8, 8 percent of North Dakota's durum crop was planted compared to 4 percent the previous week and 0 percent for the five-year average.

USDA estimated no durum export inspections for the week ending April 6. There was no durum export sales reported for last week.

In its April crop production report, USDA cut durum ending stocks 1 million bushels. The ending stock cut was caused by a 2 million bushel reduction in supply (less imports) and a 1 million bushel reduction in domestic demand. In the end durum stocks were estimated at 17 million bushels.

Cash bids for milling quality durum on April 12 at $8.25 in Berthold, N.D., while Dickinson, N.D.'s bid dropped to $8.15.

Canola

Canola futures on the Winnipeg, Manitoba, exchange closed the week ending April 12 with $8.10 (Canadian) gains. The canola market traded on the plus side most of last week with much of the strength coming from strong domestic commercial demand and from spill-over strength from a friendly U.S. April crop production report, which continues to show tight supplies of vegetable oil products.

As of April 8, 1 percent of North Dakota's canola crop had been planted compared to 0 percent the previous week and 0 percent for the five-year average.

Cash canola bids in Velva, N.D., on April 7 were $28.93.

Sunflowers

The soybean oil export sales pace for the week ending April 6 was estimated at 2.1 trillion metric tons, bringing the year-to-date total to 333.3 trillion metric tons, down from last year's record 1,144.1 trillion metric tons. Cash sunflower bids in Fargo, N.D., on April 12 were at $27.05.

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