RAY GRABANSKI COLUMN: Market higher early, then sell-off late
Wheat Wheat began the week by closing with sharp loses correcting itself from the previous week&aposs gains on a lack of fresh news. Losses were limited by gains in corn and also by supportive outside markets with crude oil and metals moving ...
Wheat began the week by closing with sharp loses correcting itself from the previous week&aposs gains on a lack of fresh news. Losses were limited by gains in corn and also by supportive outside markets with crude oil and metals moving higher for the day. The predictions on the crop progress report are anywhere from a 3 percent decrease in spring wheat conditions to a 2 percent increase in spring wheat conditions. This report could provide some strength to the market if conditions have fallen because of the dry condition in the Northern Plains. The Wheat Quality Council also began its annual U.S. hard red spring wheat tour July 28. This tour will serve to access the condition of the crop primarily in North Dakota, South Dakota and Montana.
Wheat started out July 29 sharply lower on a lack of fresh bullish news and the trend of wide spread commodity liquidation. Wheat continued to move lower until midsession, when the weather forecast confirmed that the Midwest would be experiencing hot dry weather followed by some rains. This helped trim losses on the Minneapolis Grain Exchange with concerns of crop damage to spring wheat. Also, the Kansas City Board of Trade was able to finish with some slight gains on a bounce from the winter wheat harvest, which should be wrapping up shortly. Additionally, losses were trimmed by rallying corn, which has been an indicator of the wheat market with both commodities being used for feed.
The market closed lower July 30, pressured by a lack of fresh bullish news and the ongoing spring and winter wheat harvest. There also is some spreading of long corn and short wheat weighing on prices. In addition, there is a need to keep prices lower with the record wheat crop expected globally this year to compete for export demand. The 2008 hard spring wheat and durum tour is showing a good wheat crop in eastern North Dakota, but that deteriorates moving westward across the state where they have seen less moisture. This is in line with expectations and thus is having minimal effect on the market.
Wheat started out the day Aug. 1 moving sharply higher on bullish export sales and technical support with a lack of other fresh news. With wheat&aposs recent losses, it was time for a bounce, which inspired the technical buying that pushed prices higher. Higher-than-expected export sales also provided underlying support. Though the volume of trades was thin and as corn futures fell sharply lower this pulled wheat down as well. The Minneapolis Grain Exchange was able to retain some gains on concerns over spring wheat with hot, dry weather continuing in the Northern Plains.
Corn started the week with modest gains. Support came from an increase in export demand, with weekly export inspections higher than expected and a private export sale boosting demand. Also, concerns over hot dry weather in the western Corn Belt are adding some support. Even though we are moving out of the crucial pollination stage for corn, there still is concern that this hot dry weather front will lead to damage. There also is some additional concern after weekend rains in Iowa and Missouri produced flooding. Providing some additional underlying support was the outside markets in which crude oil and metals were bullish for the day.
Corn futures closed sharply higher July 29 on end user buying, weather concerns and increased export demand. Corn started out lower from the overnight on improving crop conditions and ideas that the weather that pushed prices higher July 28 may not be in the forecast. The July 28 crop progress report put crop conditions up by 1 percent, which weighed on prices early on. Adding to the downward trend was widespread commodity liquidation and lower crude oil.
Midweek futures closed with modest gains in the front months and sharp gains moving into the &apos09 contracts, on support from a technical bounce and with the government decision on the Conservation Reserve Program adding support. Technical buying is providing support from mostly front months, with 2009 futures supported by the government&aposs decision to not release CRP land into production. This measure was being considered as a reaction to rising food prices, but with the government becoming more comfortable with this year&aposs production, the removal of land from the CRP program was not seen as necessary. This means that acreage will remain finite, and this is providing support for prices. Limiting gains is the forecast for favorable growing conditions with near-term hot weather being seen a limited threat. Also applying pressure is bearish outside markets with the U.S. dollar higher and the crude oil lower in the morning though it did recover to be sharply bullish near close.
Moving toward the end of the week, corn finished sharply lower falling on bearish outside markets and technical selling. After some recent gains from a technical bounce, it was time for the market to fall again, and with no fresh bullish news to support gains, that is exactly what happened. If the market were to break through the $6.20 barrier, we could expect more gains from the market bulls, but if the market were to close below $6, we could see the market opening up to more selling pressure. In the outside markets, we saw crude oil lower and the U.S. dollar higher, which helped to push the market lower. Export sales were within expectations but added to pressure with the number below export sales at this point last year.
July 28, soybeans closed with sharp gains as the market consolidates after a period of loss. The market has been moving sharply lower over the past couple of weeks and is due for a bounce. Also there is concern over weather conditions as the crop moves into the critical month for development. Concerns have come from heavy rains this past weekend in Iowa and Missouri and also concerns over the hotter drier weather that is forecasted to hit the Corn Belt later during the first week of August. This is also especially of interest because crop development still is lagging well below the five year average. Outside markets also provided some underlying support with both crude oil and metals moving bullish for the day.
Soybeans finished sharply higher July 30, recovering after the morning&aposs consolidative trend. Pushing prices higher toward the end was spillover from rallying corn and momentum off of the previous day&aposs announcement that the government would not being releasing producers from their CRP contracts. This news had a greater effect on &apos09 contracts.
The futures market closed mixed Aug. 31 to neutral after rising sharply higher in the morning on concerns over crop stress. Dry weather in the Delta and moving up into the Corn Belt is creating concerns over crop stress pushing prices higher. This also is concerning because as we move into August, soybeans will be moving into a vulnerable stage of development and with hot weather in the forecast traders are adding some risk premium to the marketing addition gains were supported by bullish export sales. As we moved toward the close of the session, soybeans fell sharply on spillover from corn and were able to only finish with slight gains at best.
The U.S. Department of Agriculture estimated barley shipments during the last week of July at 17,000 bushels with China the only destination. This brings the year-to-date barley shipments pace to 1.2 million bushels compared with 674,000 bushels for last year at this time. Barley&aposs export sales pace for last week was estimated at 5,000 metric tons with Canada the only destination. This sales pace was slightly offset by a cancelation from Japan for 3,800 metric tons. This resulted in a net sales pace for the week of 1,200 metric tons. Pro Ag is starting to get reports of barley harvest activity. So far, the reports have the crop less than ideal as test weights and plump are very low.
USDA put durum shipments pace at 214,000 bushels during the last week of July. Durum&aposs export sales pace for last week was estimated at 200,000 bushels. This brings the year-to-date export sales pace for durum to 9.5 million bushels compared with last year&aposs pace of 18.1 million bushels. North Dakota producers are reporting durum as 55 percent turned compared with 18 percent for last week and 31 percent for the five-year average. Producers also are saying 2 percent of the state&aposs durum has been harvested compared with none last week and 2 percent for the five-year average.
Canola futures on the Winnipeg exchange will end the week with losses after trading steady to slightly higher the entire week. It was all up to the events of Aug. 2, and with the market sharply lower, it pushed the canola market to end the week on a lower note. The canola market was supported early in the week by a lack luster U.S. soybean complex but gains were kept in check each session by as close to ideal growing conditions as you could get. By the beginning of August, the collapse in the U.S. soybean complex spilled over to put pressure on the canola market as well. Adding light selling pressure was a report from the Saskatchewan Agriculture office putting this year&aposs canola crop at 4.425 million metric tons, which is larger than first estimated. North Dakota&aposs canola crop is 39 percent turned compared with 18 percent the week before and 46 percent for the five-year average. Normally 1 percent of the states canola crop would be harvested at this time.
As of July 20, 9 percent of North Dakota&aposs sunflower crop was in bloom compared with 4 percent for the week before and 21 percent for the five-year average. It appears that the hot dry weather North Dakota has been experiencing the past week to 10 days to two weeks has started to affect all of the crops raised in the state.