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RAY GRABANSKI COLUMN: Wet weather continues in the Corn Belt

Wheat Wheat was sharply lower on technical weakness and expectation of a large global harvest. The week started off sharply lower on technical pressure and improving weather conditions. Weather conditions looked to be warmer and drier, which will...

Wheat

Wheat was sharply lower on technical weakness and expectation of a large global harvest. The week started off sharply lower on technical pressure and improving weather conditions. Weather conditions looked to be warmer and drier, which will aid winter wheat as we move toward harvest; recent rains helped improve the condition of hard red winter wheat in the Southern Plains. Also, Statistics Canada released its projections for acreage with wheat coming in at 25.109 million acres. This was significantly higher than last year's 21.617 million acres. April 22 was the bullish day of the week with corn closing modestly higher rebounding from recent losses and aided by spillover with crude oil reaching record levels. April 23 pushed wheat sharply lower once again. With little fresh news, the market is concentrating on the effects of a significantly higher global harvest. Both the European Union and China are expected to have bumper crops this year. Australia is projecting a 26 million metric-ton harvest, which is twice that of their harvest in 2007. April 24 continued the lower trend with additional pressure coming from corn and soybean spillover.

USDA export inspections were above expectations at 22.4 million bushels. This is with preliminary expectations of 13 million to 20 million bushels. However, this only brings us to 87 percent of the new projection of 1.275 billion bushels for the marketing year with only seven weeks left. Primary destinations were Indonesia and Nigeria. Export sales were within expectations at 10 million bushels. This is with preliminary estimates of 7.3 million to 14.7 million bushels. This puts us at 1.236 billion bushels cumulatively for the marketing year.

Wheat has been the golden child of the grain markets the past 12 months, with the pinnacle in February when hard red spring wheat futures hit $25 for a high. This was quite an achievement and has pretty much put the frosting on the wheat cake for this year and perhaps even for decades. Cash hard red spring wheat prices are now worth less than half of what they garnered just two months ago -- a remarkable change in a short period of time. Wheat prices have dropped steadily since then, taking new crop Chicago wheat down below the $8.50 level after tipping the $13 level earlier. This is a huge price move for wheat growers, and one that at this point looks like an opportunity wasted. Not only have 2008 wheat prices dropped solidly, but 2009 and 2010 have dropped hard as well from previously dramatically high levels. Pro Ag expects this to continue, as worldwide wheat conditions continue to improve.

Corn

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Corn futures were sharply lower on spillover pressure and bearish weather conditions. The week started off with an improved planting outlook, which weighed on prices. The Corn Belt did not receive the excess rain forecasted and temperatures were warmer. This indicated increased planting progress, which in partnership with technical weakness left prices lower for the day. April 22 brought a rebound as corn turned sharply higher after recent losses and aided by spillover from rallying crude oil, which rose to record levels. By midweek, corn had fallen lower once again. April 23 was a volatile trading day with the market stuck in choppy two-way trade. Corn made a rebound during the day on spillover from crude oil and soybeans but later fell lower again. Traders were hesitant to move significantly in either direction while waiting on weather conditions. April 24 was lower on influence from speculative selling in outside markets and spillover from lower soybeans and wheat. This allowed prices to fall lower for the day despite news that the Corn Belt will be experiencing rain and colder temperatures, which will delay any widespread planting efforts.

USDA weekly export inspections were bearish at 36.2 million bushels. This is with preliminary estimates of 40 million to 45 million bushels. This is bearish with 46.9 million bushels needed to stay on pace for the year. Primary destinations were Japan and Korea Republic. Export sales were within expectations at 38.9 million bushels. This is with preliminary estimates at 23.6 million to 49.2 million bushels. This is the highest weekly figure since mid-February.

While wheat has become the ugly sister after its two-month metamorphosis, one has to start looking at the corn market with its current $6-plus price level as being vulnerable. Of course, we all know corn planting is lethargically behind normal, with progress at a terribly slow pace for now. In fact, weather forecasts haven't changed, while corn prices have hovered for the past few weeks. The volatility is there, but so far, corn doesn't appear to have any technical appearance of topping -- until you glance at the wheat market. With wheat prices clearly retreating from previous highs, wheat is starting to become priced as a feed grain -- a dangerous development for corn. Corn growers can start to get nervous when they see the $5 break in wheat prices to the point where it might start entering feed rations again. Corn fundamentals look impossibly bullish for now, but as all grain traders are aware, things are always the most bullish at the top.

Soybeans

Soybean futures finished steady to slightly higher with trade remaining in the boundaries of a two-week range. There was little fresh news as far as government reports, etc, but that may not matter as we enter the last part of April and the accompanying weather markets. Weather patterns in the Corn Belt were able to warm up and dry out slightly April 21 and 22, allowing soybean futures a chance to bounce higher as corn planters started to move. By April 23 or so, that optimism had played out and focus shifted to positioning for the weekend as well as option expiration. Because of that, we saw prices retrace some of their gains, but the net effect was negligible. From here on out, we expect to see weather be a driving factor as the production season ramps up. If we were volatile before, we don't expect to get any calmer.

USDA released weekly export sales and inspection numbers for the week ending April 17. The numbers were neutral to friendly, with the U.S. maintaining a decent export pace thanks to low dollar values and social unrest in areas of South America. Export inspections came in at 19.66 million bushels, ahead of trade expectations for 12 million to 18 million bushels. Sales were more neutral with USDA reporting 13.8 million bushels of soybeans sold, in the middle of trade expectations for 7.3 million to 18.4 million bushels.

Grain markets continue to try the patience of almost all producers, offering conflicting information at virtually every turn. Soybeans shot higher in late February-early March only to finally crash when USDA revealed planting intentions much higher than expected. Weather then turned wet, forcing the market to build a huge premium for corn to ensure it's production. The interesting part of the past month, though, has been the resiliency of soybeans. They have rebounded from losses and seem to be stabilizing. This is an encouraging state of affairs, although market analysts and producers alike may be at a loss to explain it. Pro Ag would make this observation, however: Corn prices are offering some attractive profits in many cases. That makes new crop corn look like a better sell at this time and gives us the "incentive" to wait on selling more new crop soybeans.

Small grains

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Barley producers made good progress, nearly catching up to the five year average. At the same time, dry conditions have created some concerns about emergence of durum and barley, unless areas of North Dakota, South Dakota and Montana receive moisture soon. As of April 20, USDA is reporting the nations barley crop at 22 percent planted versus the five-year average of 23 percent. Progress by state was as follows: Idaho 39 percent versus 43 percent average; Minnesota zero versus 11 percent average; Montana 31 percent versus 28 percent average; North Dakota 10 percent complete versus 7 percent average; Washington 33 percent complete versus 64 percent average. It will take much warmer, drier weather before Minnesota and Washington can make good progress. In other news, Statistics Canada acreage estimates were released April 21 and showed prospective barley plantings down 14.1 percent. Durum acres were projected to be 22.5 percent higher.

Dry beans

Dry bean planting may just be getting started in many areas, with progress not reported by USDA. Planting conditions in the major areas is variable, with dry areas in the west but soggy, cold conditions into Minnesota and Michigan. So far, we have seen no change in the price offered for new crop pintos or navies, and we would imagine that prices would remain relatively stable into the coming weeks.

Oilseeds

Oilseed prices were relatively stable, as markets lacked a lot of direction from either fundamentals or technicals. Outside influences such as crude oil pushed to new highs, however, so we would anticipate that spec interest in commodities is not over. Soyoil and soybeans both have stayed within a constant range in the past two weeks, and that will offer a lot of stabilizing support to minor oilseeds that may look for direction. USDA is not reporting any measurable planting progress at this time. Statistics Canada reports are looking for relatively little change in oilseed acres, with canola acreage projected at 0.5 percent higher and soybeans up 2.4 percent. Flax was the exception, however, up 12.4 percent from the previous year.

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