Grabanski: Markets position ahead of report
Wheat Wheat started and ended last week with losses, but managed to post gains midweek. For the week ending Nov. 5, December Minneapolis wheat dropped 9.25 cents, December Chicago was up 4.25 cents and December Kansas City slipped 7.75 cents. Los...
Wheat started and ended last week with losses, but managed to post gains midweek. For the week ending Nov. 5, December Minneapolis wheat dropped 9.25 cents, December Chicago was up 4.25 cents and December Kansas City slipped 7.75 cents.
Losses were the main feature of trader’s attentions to start and end the week. Selling was tied to rain in much of the dry Southern Plains. Some areas, such as Texas, received an abundant amount, while Kansas and Oklahoma benefitted from the moisture.
Pressure came from disappointing export estimates (shipments and sales), which came in below earlier estimates, and below the pace needed to make the U.S. Department of Agriculture’s projections.
The dollar has rallied to recent highs, which has hurt wheat exports, but U.S. wheat exports are dismal because the U.S. is the world’s grain bin, as farmers hold product until it is needed to fill a production shortfall.
Wheat saw decent gains during the middle of the week.
Technical buying was the main supporting factor, while additional support came from weather concerns as continued dryness in Russia, Ukraine and Australia pushed wheat. Commercial buying added strength, after rumors Saudi Arabia will increase wheat imports because of a lack of suitable land on which to grow wheat to meet its needs.
Chicago wheat is strong, but the other wheat exchanges have faltered. Traders seem to think the soft red market should be trading at a premium to the other wheat exchanges.
Part of that is from expectations some Middle Eastern countries will surface as buyers of U.S. wheat, but if that class of wheat is at a premium, demand is not likely to resume anytime soon.
As of Nov. 1, 88 percent of the nation’s winter wheat crop was planted, compared with 83 percent the previous week and 90 percent for the five-year average.
Emergence is estimated at 72 percent, compared with 62 percent the previous week and 73 percent for the five year average. Winter wheat’s crop condition rating improved 2 percent to 49 percent good to excellent, 39 percent fair and 12 percent poor or very poor.
The corn market lost ground on the week, as traders look ahead to USDA’s November Crop Production report, which will be released Nov. 10.
Expectations are calling for yield, production and stocks to increase. Harvest is nearly complete, and demand has been less than stellar. As of the Nov. 5 close, December corn was down 7.5 cents.
Corn struggled Nov. 2, moving lower to start a new week and month. Harvest pressure remains in place, and expectations were that harvest was 85 percent complete, which the report later confirmed.
Additional weakness came from a disappointing export inspections estimate.
A turnaround Nov. 3 saw the market close with small gains, and the only higher close of the week. Short covering and a sharply higher crude oil trade offered support.
Selling returned Nov. 3, as corn could not muster buying interest, even with strength in the soybean and wheat markets.
Traders are looking ahead to the USDA report, with expectations calling for better-than-expected yields in the western U.S. The ethanol report showed higher production and stocks. Selling interest came back into the market Nov. 5. Early weakness came from a disappointing export sales report, with sales running 32 percent behind last year’s pace, and shipments 26 percent behind.
As a side note, China is changing its ag policy. For the next five years, China will pay farmers to summer fallow land, rather than buy surplus supplies. China’s past practices have hurt its land production potential, and leaving it idle will increase its fertility.
Ethanol production for the week ending Oct. 30 averaged 969,000 barrels per day, up 2.7 percent from the previous week. Total ethanol production for the week was 6.783 million barrels. Corn used in production is estimated at 101.75 million bushels and needs to average 100.466 million bushels per week to meet this crop year’s USDA estimate of 5.25 billion bushels. Stocks were 18.774 million barrels, up 2.7 percent from the previous week and up 9.4 percent, compared with last year.
For the week ending Nov. 1, corn was 85 percent harvested, compared with 62 percent one year ago, and 79 percent for the five-year average.
Good demand and large supplies have been fighting for control of the soybean market lately, with supplies winning out the past couple of weeks.
Harvest is wrapping up in the U.S., and it looks as if there were good yields in the majority of the country.
South America has a favorable forecast for November, which will flood an already full soybean pipeline. For the week ending Nov. 5, November beans were down 15.5 cents.
Large export inspections numbers brought the same story for soybeans, as the market closed lower Nov. 2. Soybeans were the only grain to start in positive ground, but quickly followed wheat and corn lower for the day. Good exports and a new sale of 120,000 metric tons of soybeans to China could not offset improving weather conditions in South America.
Soybeans had a couple of slow news days in the middle of the week. They closed unchanged Nov. 3. Nov. 4 saw a small rebound, as beans opened higher and stayed there for the trading session. Strength in soybean oil and meal gave the market a small boost.
Grains had a bad day Nov. 5, but soybeans dropped the farthest. Soybeans came under pressure on multiple fronts.
Soybean exports started with negative news, coming in well below estimates, and recording the lowest number for this marketing year. Favorable South American weather, lower crude prices and a strong U.S. dollar put pressure on the grains.
Traders were positioning ahead of USDA’s Nov. 10 crop production report.
This report carries the chance of higher U.S. yields, especially soybeans. Average estimates are a yield of 47.5 bushels per acre, compared with October’s 47.2 bushels per acre. Production estimates are at 3.915 billion bushels, compared with October’s 3.888 billion bushels. Trade estimates for ending stocks are at 435 million bushels, compared with last month’s USDA estimate of 425 million bushels.
The USDA report should give the market a better picture of which side is winning this supply and demand battle.
For the week ending Nov. 1, Soybeans were at 92 percent harvested, compared with 87 percent the previous week and ahead of the five-year average of 88 percent.
On Nov. 6, Progressive Ag posted a pre-report on its website in advance of USDA’s November crop production report. Visit progressiveag.com/crop-marketing for details. Also on the site will be a video in which we analyze the report and how the market should react, as well as a strategy for liquidating our profitable, long-standing 2015 crop hedges. The pre-report link is progressiveag.com/usdapre.
We also will host a noon webinar Nov. 10 to summarize the report, and discuss how we think the market will trade in the coming week. We will take 10 to 15 minutes of live questions by email and Twitter. A link to the webinar is progressiveag.com/usdapost.