Position rebalancing drives market
Wheat The wheat markets gained 15 to 20 cents on the week. Reallocation by funds benefited the wheat markets this week, as wheat was viewed as undervalued versus the row crops. The wheat market started the week higher with most of the early suppo...
The wheat markets gained 15 to 20 cents on the week. Reallocation by funds benefited the wheat markets this week, as wheat was viewed as undervalued versus the row crops.
The wheat market started the week higher with most of the early support coming from a stronger overnight session as well as from short covering. A weak dollar helped to add support to the wheat market as well with closing wheat prices up 14 to 16 cents. USDA's export inspections report was not friendly wheat, but the market seemed to shake that report off and concentrated on short covering. Rumors that the funds are coming in to reallocate their positions after the first of the year helped to push wheat throughout the session. Early estimates have the funds reallocation buying close to 21,000 contracts of Chicago wheat. Fundamentally, there continues to be nothing friendly for wheat.
The wheat market started the Jan. 5 session higher with support continuing to come from the lower dollar, but all three wheat markets turned negative later in the session as the dollar turned higher. Chicago had steeper losses of 4 to 8 cents, while the hard wheat markets lost 3 to 4 cents. There are indications of some strength in the cash market for spring wheat, with basis tightening and futures spread weakening, but that may be simply a seasonal function.
The wheat market started the session mixed Jan. 6 with the dollar showing some stability, but all three wheat markets turned strongly positive later in the session as the dollar continued its slide. Gains of 13 to 15 cents were posted across the three wheat exchanges. It appears that the long-awaited fund buying may have started and probably was accompanied with short-covering by local traders unwilling to stand in front of a buying surge by the funds. There also was some light fundamental support with concerns over cold weather in the winter wheat belt. Rising prices accompanied by rising open interest is a good sign for a technical rally, but watch for resistance at $5.69 March Chicago.
The wheat market started the session lower with March Chicago down 7.75 cents and recovered during the middle of the day before being lower again at the end of the day. The outside markets put pressure on wheat with the dollar sharply higher and losses in most commodity markets. Losses of 6 to 10 cents were posted across the three wheat exchanges. Export sales were downright pathetic again, so wheat actually did well considering the weak exports, higher dollar and 30-cent losses in the soybean market. Wheat is finding support from noncommercial traders as wheat appears to be undervalued vs. corn and soybeans, and winter wheat acres are estimated to be down to 40.5 million acres compared with 43.3 million last year.
Corn started the week 9 cents higher, but then quickly came back to trade close to unchanged at midsession and ended 2 cents higher. The overnight market was higher and that carried over to start the session. The outside markets also were supportive, as the dollar was lower and the crude oil market was higher, to help the early session gains. Also, the news overnight was that the funds were going to come in and buy the market and when that dried up early in the day the market went lower. The weekly inspection report was seen as bearish and limited the upside strength.
The corn market opened 1 cent lower Jan. 5 and remained in that area for the entire session. The overnight market was lower and that carried over to start the day. The outside markets did not add any direction one way or another and there was no news to make a run. Corn did hit a six-month high Jan. 4 and that resulted in some profit taking Jan. 5.
The corn market opened 1 cent higher Jan. 6 and then traded both sides of unchanged for the day. The market did firm up at the close to end the day with 2 cent gains with the strength in the outside markets. The corn traded in a small range on the lack of any fresh news. The outside markets were supportive as the dollar went lower and crude oil was stronger. Crude oil traded higher Jan. 6 than at any time in 2009. The funds still seem to be on the sideline and it remains to be seen when or if they will enter the market
The corn market opened lower Jan. 7 on the weakness in the overnight trade, but by midsession the market was slightly higher and then drifted lower to close with 4-cent losses. The corn felt pressure from the large losses in the soybean complex. The export sales also were bearish to the market as they came well below the estimates. Corn exports have been poor and this does limit the upside potential. The outside markets also had a negative tone as crude oil was lower and the dollar was much stronger.
The soybean market lost from 25 to 35 cents on the week. The South American crop seems to get larger each week and there are signs that Chinese imports will switch to South America sooner than expected.
The soybean complex started the week higher with most of the early support spilling over from a stronger overnight session. The main talk over the past few weeks has centered on the idea that the funds are going to reallocate their positions after the first of the year. Early reports have the funds looking at needing to buy more than 10,000 contracts of soybeans. The Jan. 4 session seemed to be more about the small trader trying to position themselves ahead of the funds as once the buying dried up just before midsession, the soybeans slipped on the lack of follow-through buying, closing with 9- to 10-cent gains. That is a sign that it was not the funds buying.
The Jan. 5 soybean trade was light and the market was choppy before settling with 1- to 3-cent gains at the end of the day. Exports continue to be very strong, so many traders are unwilling to be short ahead of the coming USDA reports. On the flip side, the South American crop is expected to be large and that will start coming to market in a month or two, limiting buying interest for fundamental traders. Noncommercial traders will be looked to to break the market out of its quandary.
Soybeans started the session up half a penny Jan. 6 before quickly moving lower in the early part of the day. Trade was thin and the market was mixed at the end of the day. There were some minor weather concerns out of South America, but Informa released a new South American production estimate 3 million metric tons larger than the latest USDA estimate. Crude oil is more than $82 and climbing, which already is higher than the 2009 highs, and the dollar continued to fall, but those positive factors may have been outweighed by concerns that exports to China may begin to slow down soon. The Chinese announced a new licensing requirement for soybean imports, which may result in a temporary halt in soybean movements to their ports.
The Jan. 7 soybean complex ground lower throughout the day, closing with 25- to 33-cent losses. Crude oil had small losses on the day but stayed above support at $82, while the rallying dollar put pressure on all commodities. Exports were very good for soybeans again in the latest report, but that was old news by the time the market opened. The biggest factor in the soybean market was the news that China hiked its interest rates in order to curb inflation. This will lead to slower growth and a potential decrease in their appetite for soybeans, which had seemed insatiable up until today. That news coupled with a South American crop that seems to get larger by the day was too much for this market to handle. Many traders feel that soybeans are overvalued compared with corn, and some rebalancing was reflected in the trade session.
USDA reported no barley shipments for last week. This brings the year-to-date export shipments pace for barley to 2.45 million bushels compared with 10.5 million bushels for last year at this time. There were no barley export sales reported for last week. This brings the year-to-date export sales pace for barley to 3.6 million bushels compared with 10.2 million bushels for last year at this time. USDA is projecting barley exports at 10 million bushels for the 2009 to '10 crop year. Cash Minneapolis bids for feed barley remains at $2.60, while malting barley bids remain at $3.50.
USDA reported no durum export shipments for last week. Last week's durum export sales pace was reported at 100,000 bushels. This brings the year-to-date export sales pace for durum to 32.6 million bushels compared with 14.5 million bushels for last year at this time. USDA is projecting durum's export sales pace for the 2009 to '10 year to be 50 million bushels. Cash durum bids out in the North Dakota country side are ranging between $4.10 and $4.50 with most of the bids at $4.35. USDA still is reporting a 69 cent loan deficiency payment for durum in Cass County, N.D.
Canola futures on the Winnipeg, Manitoba, futures exchange closed close to $7 (Canadian) lower for the week ending Jan. 7. The canola market started the week trading steady to slightly higher for the first few sessions of the week. A majority of the buying could be attributed to carry-over strength from a higher U.S. soybean complex and well as from a stronger U.S. energy complex. The end of the week brought pressure into the canola market with most of the selling pressure was a result of a sharply lower U.S. soybean complex. Additional selling was tied to continued concerns toward exports of canola to China (because of blackleg disease and the recent news item that China has started to increase domestic interest rates). For the most part, canola was following the soybean complex all week. The Jan. 7 cash canola bids in Velva, N.D., were at $16.66.
Cash sunflower bids in Fargo were left unchanged at $14. The Jan. 7 cash sunflower bids in Fargo, N.D., was $13.85.