Wheat: Production concerns emerge
Wheat surged forward last week, ending July 5 with sharp gains. September Minneapolis was 86.25 cents higher, September Chicago was 80.75 cents higher and September Kansas City gained 88 cents. Wheat continues to see strength spill over from corn and soybeans (which are seeing support from hot, dry conditions in the Corn Belt), and from production concerns in the Black Sea region. Early harvest results from Russia estimate wheat harvest at 5 percent complete with yields almost 40 percent below last year, while the Ukraine is 17 percent harvested with yields more than 35 percent of last year.
Wheat traded with modest gains early July 2, but slipped to trade sloppy at noon, only to firm and end with strong gains. Wheat does not have much news of its own to trade as it continues to mainly follow corn. Wheat is running up against resistance, but with the corn condition rapidly declining, it will be tough for wheat to not at least try to stay in tandem with corn.
A short session July 3 saw wheat open with strength and gain ground as the session proceeded throughout the day. Most of the support continues to spill over from the higher corn and soybean markets as drought issues continue to drive those markets to levels not seen in years. But some strength came from the U.S. Department of Agriculture's crop progress report, which now is showing a declining crop rating for spring wheat. Dry conditions in the north are starting to show up in declining wheat conditions.
The July 5 session continued to show wheat following corn and soybeans higher. Corn and soybean conditions continue to decline because of the hot, dry conditions in the central Corn Belt. The U.S. wheat crop has been able to avoid production issues (the winter wheat crop is about to be harvested and appears to be average, while the spring wheat crop is ending its growing season), but yet the market has been able to experience a decent price increase off the backs of the corn and soybean complex. Light support last week came from world production concerns as hot, dry conditions have become a little more of an issue in the Black Sea region and in Australia. This has traders thinking that wheat export demand could increase as a result of the lack of wheat being available from those two large exporting countries. But for this to happen, the U.S. dollar is going to have to cheapen up to help make U.S. wheat affordable.
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USDA reported wheat export inspections pace for the week ending June 29 at 21.5 million bushels. This brings the year-to-date export shipments pace for wheat to 84.3 million bushels, compared with 103.5 million bushels for last year at this time. Wheat export sales pace for the week ending June 29 was estimated at 15.4 million bushels. This brings the year-to-date export sales pace for wheat to 262.1 million bushels, compared with 320.5 million bushels for last year at this time.
Corn: hot, dry weather continues
For the week ending July 5, September corn gained 81 cents, while December was up 74 cents and at new contract highs. December corn traded sharply higher last week because of hot and dry weather, while yield estimates and stocks continued to shrink. Old crop finds support from tight stocks and a strong cash market.
Corn traded with strength to start the week as a result of the lack of weekend rain and triple-digit temperatures. The crop conditions report, which came out on the afternoon of July 2, also created buying interest. The crop conditions rating for corn dropped a whopping 8 percent in the good to excellent category, offset with an 8 percent increase in the poor to very poor category. The report showed that 50 percent of Indiana, 33 percent of Illinois and 48 percent of Missouri's crop was rated poor to very poor. Last week's 48 percent good to excellent is the lowest rating for week 26 since 1988.
The market continued to trade with strength after the July 4 holiday and made new December contract highs on July 5. Private yield estimates continue to shrink and support buying interest, with most in the 148- to 154-bushel-per-acre range, much below the latest USDA estimate of 166 bushels per acre. USDA will update these numbers on July 11. Crop conditions continue to deteriorate as the crop is pollinating. Another poor ethanol report and the lowest bushel usage for the calendar year helps prove that plants are slowing down. The International Grains Council raised its global corn estimate by 4 million metric tons to 917 million metric tons, but did leave the door open by stating if the U.S. corn crop continues to deteriorate, it could adjust lower. The weather forecast does show cooler weather and more rain, but the market will wait for confirmation. Traders continue to build a weather premium into the market.
Ethanol production for the week ending June 29 averaged 857,000 barrels per day. This is down 2.9 percent versus the previous week and down 5.2 percent versus last year. Corn used in production the week ending June 29 is estimated at 91.3 million bushels. Corn use needs to average 98.25 million bushels per week to meet this crop year's USDA estimate of 5.05 billion bushels. Stocks as of June 29 were 20.3 million barrels, which is down 2.2 percent from the previous week and up 9.3 percent from last year.
USDA's export inspection report was bearish for corn. There were 22.2 million bushels of corn reported shipped, below the 35.4 million bushels needed to meet USDA's projection of 1.65 billion bushels. This was within the pre-report estimates of 18 million to 24 million bushels. The export sales report for corn was 6 million bushels, of which 800,000 million were old crop, and below 11.8 million bushels needed to meet USDA's projection of 1.65 billion bushels. This was below the estimates of 7.9 million to 19.7 million bushels and bearish for corn. Total shipments last week were at 25.4 million bushels, below the 36.9 million bushels needed.
Soybeans: gains around holiday
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As of the July 5 close, November soybeans were up 98.75 cents. Short-term fundamentals remain bullish for the soybean market as global stocks tighten because of potential production concerns. Weather remains the main force in the market.
Soybeans were higher throughout the session on July 2, reaching a new high before slipping to close with moderate gains, well off the daily high. The forecast remains hot and dry, though there are hints the weather could improve later in the month. The soybean market is technically overbought, which could lead to a correction at some point. USDA announced a sale of 1.19 million metric tons to an undisclosed destination, likely China, for 2012 and 2013 delivery. This is the fifth-largest one-day sale on record.
The July 3 session had soybeans hitting another new contract high overnight and closing a few cents off that high. Crop conditions were reduced by 8 percent in the July 2 crop progress report, providing support to the market. USDA's current yield estimate is 43.9 bushels per acre, but some private estimates have been coming in below 40 bushels per acre. Export demand remains strong, as evidenced by the large sale July 2. Hot and dry weather remains a driving force.
Soybeans hit a new contract high for the sixth time in the past eight sessions on July 5, closing well above $15 after sharp gains. Support continues to come from weather concerns as hot and dry conditions lead to decreasing yields. Strong export demand is supportive to the market and is expected to continue. The soybean market ignored bearish outside markets as the dollar was sharply higher. The longer-term supply and demand outlook continues to grow more bullish.
USDA reported soybean export inspections pace for the week ending June 29 at 13.9 million bushels. This brings the year-to-date export shipments pace for soybeans to 1.22 billion bushels, compared with 1.42 billion bushels for last year at this time. Soybean export sales pace for the week ending June 29 was estimated at 64.8 million bushels (11 million old crop, 53.8 million new crop). This brings the year-to-date export sales pace for soybeans to 1.383 billion bushels, compared with 1.536 billion bushels last year at this time. With nine weeks left in soybean's marketing year, shipments need to average 12.8 million bushels and sales have exceeded USDA's 1.335 billion bushel projection.
Barley
As of July 1, USDA estimated barley export shipments pace at 4,000 bushels, with all of the bushels going to Mexico. This brings barley's year-to-date export shipments pace to 48,000 bushels, compared with 310,000 bushels last year. There was no barley export sales reported July 1. This brings the year-to-date export sales pace for barley to 3.9 million bushels, compared with 100,000 bushels for last year at this time.
Cash barley bids in Minneapolis jumped around last week, but ended the week slightly higher with feed barley bids at $5.30 per bushel, while malting barley bids remained at $6.50 per bushel.
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Durum
As of July 1, USDA estimated durum export shipments pace at 1.491 million bushels, with Algeria getting 284,000 bushels, Italy 814,000 bushels and Venezuela 393,000 bushels. Durum export sales pace for the week ending June 29 was estimated at 600,000 bushels. This brings the year-to-date export sales total for durum to 6.3 million bushels, compared with 5.8 million bushels for last year at this time.
July 5 cash bids for milling quality durum were $7.50 per bushel in Berthold, N.D., and Dickinson, N.D.
Canola
Canola futures on the Winnipeg, Manitoba, exchange closed the week ending July 5 with more than $28 (Canadian) in gains. The canola market was supported throughout the session by spillover support from a sharply higher U.S. soybean complex, as well as from concerns toward emerging dry conditions in the major canola growing regions.
July 5 cash canola bids in Velva, N.D., were at $26.31 per hundredweight.
Sunflowers
Soybean oil export sales pace for the week ending June 29 was estimated at 6.8 trillion metric tons, bringing the year-to-date total to 488.5 trillion metric tons, compared with last year's 1,246 trillion metric tons.
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July 5 cash sunflower bids in Fargo, N.D., were at $23.30 per hundredweight.
