Fund buying supports wheat market
Wheat The wheat market started the week off higher with most of the contracts higher. Early support was due to spill over support from a higher overnight session as well as from spillover support from a mostly higher grain complex. A sharply lowe...
The wheat market started the week off higher with most of the contracts higher. Early support was due to spill over support from a higher overnight session as well as from spillover support from a mostly higher grain complex. A sharply lower session in the U.S. dollar also added support to the wheat exchanges. By midsession the buying strength had run out of gas and the early session buyers had turned to be sellers once the corn and soybean complex had turned to trade lower. The winter wheat exchanges were able to hold onto their strength but Minneapolis slipped into negative territory by the close.
Dec. 16's trading session had wheat opening higher, supported by a weakening dollar. Cash traders report that the U.S. wheat market has benefited from the recent break in the dollar and commensurate rise in the euro. The continued chart buying and continued concern of cold weather affecting the wheat production helped fuel wheat prices higher.
By midweek, the wheat market's strength was continuing as the Dec. 17 session had wheat opening the session higher but coming under pressure soon after the opening. Most of the session had wheat trading sloppy and with little direction. But the wheat market was able to pull itself up and rally the last hour of the session. The wheat market started the session higher with most of the early support coming from weather. The recent winter storm and subzero temperatures that followed in behind the storm has many concerned about the condition of the nation's winter wheat crop. So far, it is way too early to be concerned with the condition of the winter wheat crop and the idea resulted in the wheat market to pull back off of its highs. But another round of fund buying stepped into the market late to help push the wheat back up to double-digit gains. A sharply lower U.S. dollar helped to push the wheat market late. As the dollar declines, it makes U.S. products more attractive for export, which wheat needs as, so far, wheat exports have been far behind the pace needed to make USDA's expectations.
Wheat started the Dec. 18 session higher with most of the early session spilling over from buying strength from a higher overnight session. Adding light support was concerns that the recent extreme drop in temperatures will cause some damage to the winter wheat in the Southern Plain states. Of course, it is way too early for damage talk, as the crop is just now going into dormancy. Most of the early strength was attributed to a lower dollar. By midsession, the strength had faded and the wheat had slipped to be just slightly higher and even some contracts had slipped lower. The selling was tied to a recovery in the dollar as well as from the morning's poor export sales estimate. Fund buying then stepped into the market to help push the market higher into the close.
For the week, Chicago March gained close to 60 cents, Kansas City March gains close to 50 cents, and Minneapolis improved close to 40 cents.
March corn opened on Dec. 15 up 13.5 cents and posted session highs early before weakening to light gains for the rest of the session, closing up 1.75 cents. The dollar was lower and crude oil was more than $2 higher overnight, but weakness in the day trade for crude oil spilled over into the corn market and all commodity markets in general. Corn finally was able to trade some positive fundamentals and carry-over interest kept corn ahead of soybeans throughout this session. After what looked like a bottom last week in the corn market, March corn now may have support around $3.60. Export inspections were at 29.3 million bushels for the week, which was in the upper range of expectations.
March corn opened up 1.25 cents Dec. 16 and had strong buying interest throughout the session, closing up 18.75 cents. Corn was able to rally throughout the day even as crude oil fell. The lower dollar as a result of the Fed rate cut was very supportive. Hot, dry weather that could hurt the corn crop is forecast in Argentina. Corn had stronger gains than soybeans again, and farmer selling is extremely tight, as the recent everyday strength in the market has given farmers little reason to sell. The downside is that new crop corn futures at $4.42 are likely to make the lower acreage estimates for 2009 outdated, as the new crop soybean to corn price ratio is only 2 to 1 vs. a historical average of 2.3 to 1.
March corn opened down 6.5 cents Dec. 19 and strong pressure from outside markets quickly brought the market lower. Some late fund buying provided some support, and the market closed down 8 to 10 cents. Corn was the leader to the downside among the grains. The market was under pressure from a higher dollar and weekly profit-taking. The market still is strong technically, but with bearish fundamentals the market was unable to resist outside pressure.
With strong carry in the futures market and weakness in the cash market, producers with unpriced corn in storage have little reason to sell. There continues to be strong carry in the corn market with July corn 5.3 percent higher than the March contract, which is 1.3 percent per month, equivalent to 15.9 percent per year. A 15.9 percent APR should be enough to cover the cost of on farm storage for any farmer.
Soybeans opened the week of Dec. 15 around 22 cents higher on strong overnight trade and higher crude oil, but weakness in the day trade for crude oil spilled over into the soybean market. Soybeans had light losses by midday and closed down 4 to 8 cents. Soybeans remained defensive versus corn after the Informa acreage report that was bearish soybeans. Soybeans closed lower while corn closed higher two sessions in a row. November crush numbers were released within expectations, and export inspections of 34.4 million bushels also were within expectations.
March soybeans opened 6.75 cents higher Dec. 16 with support from higher crude oil. Soybeans found additional buying interest and were able to close 12 to 16 cents higher, even as crude oil weakened during the day. The big news was that the Fed cut interest rates by 0.5 percent. This made the dollar drop, which brought strong buying interest into the commodities. There were reports of dry conditions in South America, while farmer selling in the U.S. remains extremely light. Corn prices gained significantly on soybeans again, which should ease concerns of sharply higher soybean acres for 2009.
March soybeans opened Dec. 17 17.5 cents higher but quickly dropped as outside market support fell away. Soybeans traded in negative territory during the middle of the day before finding enough buying interest to close 6 to 10 cents higher. There were reports of dry conditions in South America and export sales to Taiwan, but weakened bids at the gulf indicate a softening in demand. Recent bullishly tight soybean spreads had been widening in the past few sessions. Crude oil failed to rally, even with news of OPEC production cuts, but soybeans were able to avoid the steep losses seen in the oil markets.
The soybean cash market continues to firm, with extremely light farmer selling and decent export demand. We are looking at soybean basis levels that are very competitive vs. corn in many locations. If you are holding corn and soybeans and need to sell cash grain, soybeans would receive higher priority at this time. Cash sales could be renowned with call options.
USDA reported no barley shipments for last week. This brings the year-to-date export shipments pace for barley to 9.9 million bushels compared with 23.5 million bushels for last year at this time. USDA estimated no barley sales for last week. This brings the year-to-date export sales pace for barley for this year to 10.2 million bushels compared with 40 million bushels for last year at this time. Cash feed barley bids in Minneapolis increased 35 cents this week to end at $2.60. Malting barley bids remain at $5.
USDA reported last week's durum shipments at 1.23 million bushels. The main destinations for the U.S. durum were Algeria (808,000 bushels) and Tunisia (366,000 bushels). Last week's durum exports were estimated at 200,000 bushels. This brings the year-to-date export sales pace for durum to 13.9 million bushels compared with 34.5 million bushels for last year at this time.
The Winnipeg, Manitoba, canola futures market closed the week virtually unchanged for the week. Each session this week only brought minor changes to the canola market and the net result was the market going out Dec. 19 with very small gains for the week. Support for the week came from a stronger U.S. soybean complex. The U.S. soybean complex was higher for most of the week and that lent most of the buying strength. The lack of farmer selling also added some support to canola. Winter has moved into the Northern Plains, and for producers to take crop out of the bins now, there will have to be an incentive to do so. Selling pressure was a weaker U.S. energy complex, which has been under pressure for most of the week. The January crude oil market expires soon, and it appears that it will go off somewhere in the $35-per-barrel area. Gains also were kept in check by a slower-than-expected demand and from strength in the Canadian dollar. Supplies of canola remain burdensome. Cash canola bids in Velva, N.D., increased 6 cents to end at $14.30.
Cash sunflower bids in Fargo, N.D., slipped 10 cents this week to end at $11.65.