USDA acreage report surprises market

Wheat

The market started out the week down on bearish outside markets and positioning ahead of the June 30 USDA reports. Wheat started the morning steady with little news to move the market, but as the U.S. dollar rose higher, wheat started to fall lower. Wheat can't seem to get out of the bearish momentum lately as winter wheat harvest continues to make progress. It should be noted that the July contracts are into first notice, which could account for some losses in the front months.

Wheat finished down June 30 on bearish pressure from outside market and spillover from corn. The USDA reports were mostly bearish for wheat with stocks up 118 percent from a year ago. However, acreage for wheat was down by 5 percent from 2008. The report showed spring wheat seeding at 13.77 million acres, which is up from the 13.3 reported in the March intentions report. All wheat planted acreage is for 59.78 million acres. However, this played less of a role in the market than the spillover pressure from corn and soybeans, which both saw increases in acreage up to record levels. In addition to the report, pressure came from the outside markets with the U.S. dollar moving higher and crude oil moving lower. Also, winter wheat harvest pressure is holding prices down as it is reported to be 40 percent completed. However, despite the move lower and all of the bearish news, wheat faired rather well. This is a result of the idea that wheat already was viewed to be oversold, so it didn't experience the sharp losses seen in soybeans and corn.

The market was lower midweek once again, with wheat still looking for something bullish to pull it out of its downward momentum. The USDA reports had little lasting impact on the market though there was a significant increase in stocks compared with last year. Winter wheat harvest continues to provide the most consistent bearish pressure. The outside markets and other grains aren't doing much to help pull wheat upward. However, wheat still is seen as oversold, which is limiting losses and allowed the Minneapolis Grain Exchange to stay unchanged at the close of the day.

Last week's export inspections were bearish at 10.1 million bushels. Preliminary estimates were for 13 million to 17 million bushels. Wheat needed 17.6 million bushels to stay on pace with the 2009 to '10 marketing year expectations of 900 million bushels. Exports sales are viewed as bearish coming in at 8.9 million bushels. Preliminary estimates were for 7.3 million to 14.7 million bushels. This is well below the 15.3 million bushels needed to stay on pace with the marketing year expectations of 900 million bushels.

Corn

Corn futures were lower this week by about 37 cents compared with the close last June 26. The reports that came out this week were bearish to the corn market, although export sales were good and seen as friendly.

The market started the week lower to finish with 7- to 7.25-cent losses. For the second day in a row, corn market traded the opposite of the outside markets. Corn traded lower basically on positioning ahead of this the upcoming USDA reports. USDA's crop progress report stated that 93 percent of the crop is in fair to excellent condition. The categories were fair at 21 percent, good was 54 percent and excellent was 18 percent. The excellent category went up 2 percent and the fair category went down 2 percent as compared with last week. From this report, one can assume the crop that we have is getting better. Also, the weekly export inspection numbers were seen as bearish to corn. The reported 27.7 million bushels were below the 40.1 million bushels needed to keep on pace with USDA's projection of 1.75 billion bushels for 2008 to '09 and estimates were 30 million to 35 million bushels

The market traded limit down, finishing 30 cents lower in almost all contract months. The corn market opened sharply lower to limit down and remained there for the session. Synthetically, this is about where the corn should have closed at as well. The USDA acreage report stated that there is 87 million acres planted; this is 2 million more acres than USDA estimated in the March prospective acreage report and 1 million more acres than last year. The states that increased acreage the most were Iowa (with a 400,000 acre increase in corn) and Nebraska (with a 600,000 acre increase in corn). This is 1 percent higher than last year and is the second-largest planted acreage since 1946 (2007 was the largest).

Adding pressure was USDA's other report, the quarterly grains stocks report. The stocks report showed more old crop corn in bins than expected. This means that demand has not been as robust as expected and that USDA will have to make further cuts in the demand side of the ledger. The dramatically bearish reports were enough to put pressure on the corn and force most of the months to trade limit down. Corn is extremely oversold now, and with these reports out of the way, maybe that will be enough to allow the corn exchange to now firm. Support is at $3.50 and that is close to being tested.

Soybeans

June 29 began the week with soybeans finishing mixed with the July contract month sharply higher and losses in new crop. The front months continue to be supported by tight global stocks and the high prices are needed to bring sellers to the market. The July contract moved into first notice, and so it has been the largest recipient of buying interest. New crop months are experiencing some selling pressure with expectations that tomorrow's USDA reports will be bearish for soybeans. Otherwise the market has been rather quiet with traders waiting for the USDA reports to make their next moves.

The market fell sharply lower June 30 as the market got fresh bearish news from the USDA reports on acreage and stocks. However, late in the day, the market turned around to trim some losses on the idea that selling had been overdone and with some traders taking profits. In the reports, soybean acreage was reported to be at 77.5 million acres, an increase of 2 percent from last year. Area for harvest is at 76.5 million acres and if realized will be the largest in harvested area on record. Planted area in 22 out of 31 states increased from last year. On the stocks front, soybean stocks were down 12 percent from June 2008. This could continue to provide some support for the front months. However, new crop was heavily pressured by the report and spillover from bearish corn for much of the day.

The market turned around July 1 and finished sharply higher on concerns over tight stocks. The front months have been receiving price support because of tight global stocks. However, there also is concern that new crop stocks also will be tight and so even new crop months are being pushed sharply higher. The USDA acreage report is providing some support, as traders expected more acreage than came in.

Barley

USDA reported last week's barley export shipments pace at 80,000 bushels with all of the bushels going to Mexico. This brings the year-to-date shipments total for barley to 118,000 bushels compared with 188,000 bushels for last year at this time. There were no barley sales reported for last week.

USDA estimated barley's planted acreage at 3.6 million acres compared with 4.2 million for last year. Harvested acreage is estimated at 3.1 million compared with 3.8 million for last year. North Dakota was the state the reported the largest acreage decrease as this state is estimated to plant 450,000 less acres of barley. Barley stocks were estimated at 88.7 billion bushels compared with 68.2 billion bushels for last year at this time.

Durum

USDA estimated last week's durum shipments pace at 699,000 bushels with all of the bushels going to Italy. Last week's durum export sales pace was estimated at 700,000 bushels.

Durum planted acreage was estimated at 2.56 million acres down from 2.73 million for last year. Harvested acreage is estimated at 2.45 million compared with last year's estimate of 2.58 million. Again, North Dakota was the state with the biggest change, dropping 100,000 acres from last year. Durum stocks were estimated at 25.2 million bushels compared with 8.3 million bushels for last year at this time.

Canola

Canola futures on the Winnipeg, Manitoba, futures exchange closed steady to slightly higher for the week. Early selling pressure was a result of spillover selling from a lower U.S. soybean and energy complex. But those losses were trimmed June 30 and July 2 as the canola market made up for ground that was lost from the Winnipeg exchange being closed July 1. USDA's acreage report also added some support to the canola.

USDA's planted acreage report confirmed lower U.S. canola acres than expected. U.S. canola acreage is estimated at 847,000 acres compared with 1.01 million last year. Harvested acres are estimated at 824,000 compared with 989,000 for last year. North Dakota was again the state that showed the biggest change in acres.

Sunflowers

Cash sunflower bids in Fargo, N.D., dropped 20 cents to end at $14.50 old crop while new crop bids dropped 10 cents to $15.15. Soybean oil futures closed off about 30 cents.

USDA estimated sunflower planted acreage at 2.098 million compared with 2.5 million last year. Harvested acreage is estimated at 1.99 million compared with 2.39 million for last year. Oil sunflower acreage is estimated at 1.78 million compared with 2.16 million for last year. Confections sunflower acreage is estimate at 314,000 compared with 353,500 for last year.