Wheat
For the week wheat gains close to 80 cents with much of the buying strength spilling over from the higher corn and soybean complex. The wheat did have some inside support as traders feel that the crop in Australia and that there are going to be some disease concerns in the US. Australia remains dry and most private analysts have been dropping the potential size of the crop there. As far as the U.S. crop is concerns, major flooding issues in the southern Corn Belt regions have many thinking the crop will start to determinate because of disease.
The wheat market tried to trade lower this week as the exchanges opened steady to mostly lower almost every day this week. But once the other grains started to heat up, wheat jumped on the band wagon and went along for the ride. Wheat has been playing a follower to the corn most of this week as it has had no real news of its own to give it direction. Traders have been kicking a few news items around in the pits but for the most part the news they have has been offsetting with each other. The bullish news item has to do with the excessive rain that has been falling in the Corn Belt region. Many traders are starting to think the excessive rains will soon start to cause disease issues in the soft red wheat. Harvest is right around the corner and with the recent rains it might cause some concerns. On the bearish side harvest is right around the corner and so far early yield results have the crop excellent. Wheat might struggle to hold onto gains thorough the beginning of the harvest, but once a third of the wheat is harvested, and if corn holds strong, look for the wheat market to put in its usual after harvest rally.
USDA's crop production report was not the friendly for wheat. One would have to consider it to almost to have been bearish for wheat. USDA increased all wheat production by increasing wheat's potential yield 0.7 bushels to 43.2 bushels per acre. This increased supply 40 million bushels. This increase was completely offset by increases in feed demand of 25 million bushels and 25 million bushels increase in exports. Wheat stocks did increase by 4 million bushels because of an increase of 15 million bushels in the beginning stocks estimate. World wheat numbers were also bearish as world wheat stocks are projected to increase over 8 million metric tons to 132.06 million metric tons.
June 9's afternoon's USDA's crop progress report showed the following: 84 percent of the nations winter wheat has headed compared to 75 percent for last week and 89 percent for the five year average. Nine percent of the nation's winter wheat crop has been harvested compared to zero last week and 10 percent for the five year average. The winter wheat crop condition rating remained unchanged at 47 percent good to excellent, 31 percent fair, and 22 percent poor to very poor. Spring wheat emergence was rated at 98 percent compared to 93 percent for last week and 96 percent for the five year average. Spring wheat crop ratings improved 6 percent to now be estimated at 63 percent good to excellent, 33 percent fair, and 4 percent poor to very poor. Last week's rains helped the spring wheat crop to improve and we expect the crop to continue to show improvement over the next week as this week's rains should also aid in crop development.
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Corn
We know now that we have a runaway bull market that is blasting off a market top in at least one of these commodities (corn or soybeans), whichever crop got the acres planted in 2008. (Is corn acres more than 86 million? Or soybeans more than 74 million? Or both?) Pro Ag would tend to bet on corn, as many producers who had good planting conditions this spring went with corn at its favored price ratio relative to soybeans (1.8 to 2 all spring). However, the media and those in wet areas have been crying about the poor corn planting and growing conditions, and that has propelled corn $1 higher and soybeans $2 higher in the last 2 weeks of wet weather! Is this enough premium? Pro Ag thinks at $7.50 December 2008 corn and $16.50 November 2008 soybeans it would be. We are there in corn, so we only have to wait for soybeans to spike higher to price remaining 2008 crop. Sell your guaranteed bushels (we prefer futures fix, especially in soybeans OR puts), and then also put a minimum price in your additional bushels not protected by crop insurance. Any put option will do, as corn (dropping 40 percent into harvest from highs?) and soybeans (dropping 20 percent from highs into harvest?) are susceptible to a significant price selloff if weather straightens out. A 40 percent drop in corn ould take us to $4.50 December 2008 futures for harvest lows, and a 20 percent drop in soybeans would also be a $3 to $4 break (depending on where soybeans highs end up).
June 13 could be the day that grains finally end their bull market. Pro Ag would not be surprised to see grain trade lower on the open, rally to limit up gains today, and then sell off to limit down losses by today's close. That's a huge price move in one day, but is about the only dramatic thing that hasn't happened in corn and soybeans yet this year. Wheat has seen a dramatic break like this in February, not trading $3to $4 per bushel lower while corn and soybeans are at new highs! For wheat, the best sale opportunity is to buy corn puts today, as soft red wheat for the first time in history is selling at a discount to corn in many central Corn Belt locations. It's easy to feed wheat in this scenario.
Be prepared for a dramatic trading day, with crude oil also having significant impact on grains. If crude continues to rally to $159 crude oil, then grains will go higher regardless of the improving weather forecast, which calls for warm and dry weather to dominate much of the country in mid-June. That will be barely in time for many areas to plant and replant 2008 acres, leaving us with a chance at a crop (although possibly yield reduced from lateness) in many areas.
Soybeans
The U.S. numbers were friendly as USDA cut both old and new crop ending stocks estimates. The 2007 to 2008 old crop stocks declined 20 million bushels while the potential 2008 to 2009 stocks were cut 10 million bushels. The real bearish item for the soybeans was in the world numbers. World ending stocks for soybeans were estimated to be at a record 50.41 million metric tons. For a change, instead of the U.S. holding the world's supply of grain, other countries are going to be having to store the world's crop while the U.S. stocks continue to be in tight supply. Of course most of the new crop stocks estimate is dependent on SA raising another record crop. This is not expected especially with the economic concerns going on in Argentina and Brazil. The bearish world numbers took the soybean futures market to be 30 cents lower at one point during the session but the strength in the corn and wheat helped to bring the soybean complex back to end with moderate losses by the close.
USDA estimated last week's soybean shipments at 3.98 million bushels compared to 11.6 million bushels last week. This brings the year to date soybean shipments for the year to 979 million bushels compared to 989 million bushels for last year at this time. This morning's USDA export sales report put last week's soybean sales pace at 10 million bushels old crop and 1.1 million bushels new crop. This brings the year to date export sales total for soybeans to 1.1 billion bushels compared to 1.07 billion bushels for last year at this time. The exports pace was decent and that helped the soybeans to recover late in the session.
After the close USDA estimated soybean planting progress at 77 percent complete compared to 69 percent for the last week and 89 percent for the five year average. The states that are showing delayed progress are Illinois (26 percent behind), Indiana (16 percent behind), Missouri (37 percent behind), and Iowa(9 percent behind). The soybean crop is rated at 57 percent good to excellent, 35 percent fair and 8 percent poor to very poor. This is the first rating for soybeans this year.
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Barley
In their June crop Pproduction report, USDA left barley's supply and demand numbers unchanged. Barley production is estimated to be 235 million bushels while demand remains unchanged at 235 million bushels. So in other words all of this year's barley production should be consumed. Barley's ending stocks estimate is estimated to be at 79 million bushels as beginning stocks of 59 million bushels will combine with imports of 20 million bushels. USDA estimated last week's barley shipments at 723,000 bushels with the primary destination being Japan. This brings the year to date barley shipments estimate to 723,000 bushels compared to 24,000 bushels for last year at this time. USDA reported no barley sales for the first week of barley's 2008 export season. USDA did report that 34000 metric tons of sales were carried over from the 2007 export marketing year to this year. USDA estimated barley emergence at 98 percent compared to 91 percent for last week and 95 percent for the five year average. Barley's crop condition rating improved 9 percent to now be estimated at 68 percent good to excellent, 30 percent fair and 2 percent poor to very poor.
Durum
USDA estimates the old crop durum ending stocks estimate to be 12 million bushels, unchanged from last month's estimate. USDA is estimating the 2008 to 2009 durum production to be 71.7 million bushels. The average yield for durum is expected to be 33.9 bushels per acre. USDA estimated last week's durum shipments at 1.03 million bushels. Durum's exports for last week were estimated at zero for the week ending June 5. So far to date durum's export sales for the year are estimated to be at 8.9 million bushels compared to 8.1 million bushels for last year at this time. As of June 8, 94 percent of North Dakota's durum crop was emerged compared to 86 percent for last week and 83 percent for the five year average. The states durum crop also showed a 20 percent increase in its crop condition ratings report, moving to now be estimated at 52 percent good to excellent, 46 percent fair, and 2 percent poor to very poor.
Canola
The canola futures on the Winnipeg exchange closed sharply higher June 13 and of the week. Early pressure was due to weakness in the US soybean contracts but as the U.S. soybean complex rallied the rest of the week, the strength spilled over to help support the canola market. Ninety-five percent of North Dakota's canola crop has emerged compared to 74 percent for last week and 89 percent for the five year average. Eleven percent of the states canola crop is in the rosette stage as compared to 1 percent last week and 17 percent for the five year average.
Sunflowers
For the week ending June 8 sunflower planting progress was estimated at 68 percent complete compared with 57 percent for last week.
