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RAY GRABANSKI COLUMN: Markets choppy; wet weather continues

Wheat The wheat market traded in a tale of three cities, with each exchange trading its own news. The Chicago market was supported early in the week by spillover buying from the strength seen in the corn and soybean contracts. Also adding support...

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Wheat

The wheat market traded in a tale of three cities, with each exchange trading its own news. The Chicago market was supported early in the week by spillover buying from the strength seen in the corn and soybean contracts. Also adding support early in the week was the weather forecasts that were calling for heavy rains to fall in the Corn Belt every three to four days. This was starting to cause concern among the wheat traders in Chicago that the winter in this region would be more susceptible to disease pressure with this forecast. By late in the week, the forecasts had changed and taken most of the rain out of the forecast for early this week. The current forecast is showing the path of the storm to be more northerly than first expected.

The Kansas City wheat exchange has been playing the follower role more than anything. For the most part, the exchange has been keeping its eye on the weather forecasts. Forecasts are calling for another good soaker of the rain to move into the winter wheat regions. This rain event is expected to drop a decent amount of rain in a majority of the driest areas of the winter wheat region. This should help to increase the crop condition of the winter wheat crop. Rumors also have been floating round the trade that temperatures are forecast to drop into the low 20s for parts of the winter wheat regions, but it very unlikely that this would result in any crop damage. Producers purposely planted the wheat later than normal just to avoid frost damage.

The Minneapolis market has been the weakest performer, mainly because of planting progress. A majority of the Northern Plain states have been able to be in the field seeding, and the next spring wheat planting progress report is expected to show a decent amount of wheat being put in the ground. Weather forecasts also are calling for rain to move into much of the region. That added more pressure to the spring wheat market.

The most bullish news for wheat for the week was news that Kazakhstan will be imposing a ban on wheat exports until Sept. 1. Also adding support to the wheat was an announcement that Ukraine also has suspended exports. This would make the United States one of the only countries in the wheat-exporting market, again. The U.S. dollar continues to be weak (dropping sharply lower April 18), and that, combined with the news that a few more major wheat-exporting regions of the world will be halting exports, has helped to increase the opportunity of more wheat sales. If these countries remain out of the export market, it certainly will mean more interest in U.S. wheat, and that will push old crop prices in an attempt to ration what little old crop supplies that are left.

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USDA estimated last week's wheat shipments at 13.79 million bushels compared to 25 million bushels the week before and 23.3 million bushels for last year at this time. This brings the year-to-date shipments total for wheat to 1.08 billion bushels compared with 761 million bushels for last year at this time. USDA export sales report, which was not friendly to wheat. USDA estimates last week's export sales pace for wheat at 4.7 million bushels for the old crop wheat and 6.6 million bushels for new crop -- both very disappointing for wheat.

Cash wheat bids in Minneapolis for 14 protein wheat ranged from being 27 cents lower to be as much as 3 cents higher. This puts bids between $12.23 to $12.93.

Corn

Corn futures posted new highs before retreating, initially boosted by wet weather and planting delays but seeing technical pressure later on. Much of the southern and eastern Corn Belt continue to see rain showers and cool temperatures. The absolute onslaught of rain seems to have dwindled, but things just aren't drying out. This puts significant pressure on corn price to maintain a wide "premium" over soybeans as traders try to ensure that the market does not lose any production despite the disadvantageous weather. Also adding support was the run of crude oil to a record $115 a barrel. Corn prices this high certainly are putting the pinch on ethanol, but with crude prices that high, it may allow paid-for plants to continue operations. Weather forecasts for this week have been inconsistent, but it now looks like rain patterns are weakening (temperatures still a little cool). All of these things drove corn to new highs before profit taking and consolidation caused losses before the weekend. Look for a second attempt to break $6.30 this week.

USDA export pace continues to be amazing, with the week's USDA reports certainly beneficial. Weekly export inspection numbers for the week ending April 10h were 45.4 million bushels, ahead of trade expectations of 38 million to 44 million bushels. Also, we continue to run ahead of the pace needed to meet USDA projections. Sales numbers for the same week also were strong at 922,500 metric tons compared with expectations of 600,000 to 900,000 metric tons.

Weather is becoming critical, as the intended planted acres of corn was not enough to meet current demand at a normal crop yield level. But spring 2008 has become the monsoon that never ends for the central and eastern Corn Belt. A large swath of land in this area is as soggy as its ever been, and now the official readings on planting progress are showing delayed planting. These official estimates are not likely to change at least for the next two weeks, with wet conditions and cool weather forecast into the next two weeks. This makes for a interesting spring as the demand-led bull market has really not ended yet, with energy prices pushing to new highs and corn use (and soybean demand still strong). The United States needs at least another 4 million to 5 million acres of corn planted than intentions stated, and yet the weather is not making it any easier for that to become accomplished. We also need at least trend yields to meet our demand needs, and delayed planting make that less likely to become a reality.

Soybeans

Soybean futures finished lower on the week, pushed by the continuation of wet weather as well as minor technical concerns. Cool, wet weather remained in the forecast for large sections of the southern and eastern Corn Belt, slowing drying times and keeping corn planters out of the field. This had bearish implications for soybeans, as it means at the very least the corn-soybean ratio must remain skewed in favor of corn. Outside markets had little influence as higher crude and lower dollar values were offset by increased confidence in the stock market. On a technical note, corn prices hit new highs but failed to follow through with any more of strength. Without corn to support or lead beans higher, priced drifted into April 18 before selling again stepped up for the weekend.

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USDA export numbers were encouraging, as Argentina producers still are on their on again-off again strike. USDA released inspections for the week ending April 10, and those numbers were reported at 14.5 million bushels, just under trade expectations but still enough to meet projections. Sales numbers April 17 for that same week were more impressive at 408,000 metric tons, near the high end of trade expectations for 200,000 to 500,000 metric tons.

Weather patterns and corn technical trading lead the way for beans. This effectively keeps any soybean rally attempts in check and rightly so. South America is harvesting an impressive crop and, given the results of the March 30 planting intentions report, the U.S. should suffer no shortage of soybeans in the 2008 to '09 growing season. We may very well keep a strong export pace given Chinese interest and low dollar values, but don't look for a rally in the near future. While 2007 to '08 was a ripe environment for soybeans with production shortfalls and strong demand, the market did its job of attracting more supply. It is, at best a temporary solution, though, as now a shortfall of corn leaves us wondering what the future will bring. As we have said so many times in the past, producers should be prepared for everything from a bumper crop to rust.

Barley

USDA estimated 13 percent of the nation's barley had been planted as of April 13. This compares with 7 percent the week before and 15 percent for the five-year average. Idaho, Montana and North Dakota are at or slightly ahead of their five-year average paces for planting.

This is mainly a result of extremely dry conditions in much of the main barley producing regions of the Northern Plains. USDA estimated the previous week's barley shipments at 725,000 bushels with Sudan, France and Japan the major destinations. This brings the year-to-date total shipments for barley to 33 million bushels compared with 18 million bushels for last year at this time. USDA's export sales report showed a few cancellations of barley exports last week. Both Taiwan and Japan canceled barley imports last week while Japan, Taiwan and Mexico were all buyers last week. The net result was a slightly negative export sales pace estimate for barley. Minneapolis cash barley bids remain unchanged with feed barley bids at $5.35 while malting barley bids remain at $7.25.

Durum

USDA estimated durum shipments at 772,000 bushels. USDA estimated last week's export sales pace for durum at 200,000 bushels. This brings the year-to-date export sales pace for durum to 39.5 million bushels compared with 29.6 million bushels for last year at this time. North Dakota producers planted 3 percent of the state's durum last week. This compares to the five-year average pace of 2 percent.

Canola

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Canola futures in Winnipeg, Manitoba at the end April 17 had gained $1 to $2 for the week. Most of the strength for the week was a result of spillover strength from the U.S. soybean complex. North Dakota producers have not started planting canola as of yet, according the USDA crop progress report. The report estimated the 5 year average planting pace at 1 percent. Cash canola bids in Velva jumped 21 cents to put old crop bids at $27.70. New crop bids improved 38 cents to $27.06.

Sunflowers

Cash sunflower bids in Fargo, N.D., increased 10 cents this week to $26.15 old crop and $26.25 for new crop. The increase in the cash bids was a result of the strength in the soybean and soybean oil futures markets.

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