(Farm & Ranch Guide) – Wheat surged forward last week ending the week July 5 with sharp gains. For the week ending July 5 September Minneapolis pls was 86.25 cents higher, September Chicago was 80.75 cents higher, and September Kansas City gained 88.0 cents.
Wheat continues to see strength spill over from corn and soybeans (which are seeing support from hot dry conditions in the Corn Belt) as well as from production concerns in the Black Sea region. Early harvest results from Russia is estimating wheat harvest 5% complete with yields almost 40% below last year while the Ukraine is 17% harvested with yields over 35% off last year.
Wheat traded with modest gains early July 2 but slipped to trade sloppy at noon, only to firm to end with strong gains. Wheat really does not have much news of its own to trade as it continues to mainly follow corn. Technically wheat is running up against resistance, but with corn condition rapidly declining, it will be tough for wheat to not at least try to stay in tandem with corn.
The short session July 3 saw wheat open with strength and gain ground as the session proceeded throughout the day. Most of the support continues to spill over from the higher corn and soybean markets as drought issues continue to drive those markets to levels not seen in years. But some strength came from USDA’s Crop Progress report which now is showing a declining crop rating for spring wheat. Up until this week, wheat has not been participating in the drought issues, but as of last week, dry conditions in the North are starting to show up in declining wheat conditions.
The July 5 session continued to show wheat following corn and soybeans higher. Corn and soybean conditions continue to decline due to the hot dry conditions in the central Corn Belt. The U.S. wheat crop has been able to avoid production issues (the winter wheat crop is about harvested and appears to be average while the spring wheat crop is ending its growing season) but yet the market has been able to experience a decent price increase off the backs of the corn and soybeans complex.
Light support last week had been coming from world production concerns as hot dry conditions have become a little more of an issue in the Black Sea region as well as in Australia. This has traders thinking that wheat’s export demand could increase due to the lack of wheat being available from those two large exporting countries. But for this to happen, the U.S. dollar is going to have to cheapen up to help make U.S. wheat affordable.
USDA reported the wheat export inspections pace at 21.5 MB for the last week in June. This brings the year to date export shipments pace for wheat to 84.3 MB compared to 103.5 MB for last year at this time. That week’s wheat export sales pace was estimated at 15.4 MB. This brings the year to date export sales pace for wheat to 262.1 MB compared to 320.5 MB for last year at this time.
As of July 1, 69% of the nation’s winter wheat crop had been harvested compared to 43% for the five-year average. Spring wheat heading is estimated to be 73% complete compared to 35% for the five-year average. Spring wheat crop conditions dropped 6% to 71% g/e, 24% fair, and 5% p/vp. Last year at this time the crop was rated 70% g/e.
Corn
For the week ending July 5, September corn gained 81 cents while December was up 74 cents, and at new contract highs. December corn traded sharply higher last week due to very hot and dry weather, while yield estimates and stocks continue to shrink. Old crop finds support from tight stocks and a strong cash market.
Corn traded with strength to start last week due to the lack of rain over the weekend and triple digit temperatures. The crop conditions report, which came out on July 2, also created buying interest. The crop conditions rating for corn dropped a whopping 8% in the g/e category. The drop in the g/e category was offset with an 8% increase in the p/vp category. The report showed that 50% of Indiana, 33% of Illinois and 48% of Missouri’s crop was rated poor to very poor. Last week’s 48% g/e is the lowest rating for week 26 since 1988.
The market continued to trade with strength after the July 4th holiday and made new December contract highs on July 5. Private yield estimates continue to shrink and support buying interest, with most in the 148 to 154 bu/acre range, much below the latest USDA estimate of 166 bu/acre. USDA will update these numbers on July 11.
Crop conditions continue to deteriorate as the crop is pollinating. Another poor ethanol report and the lowest bushel usage for the calendar year helps prove that plants are slowing down. The International Grains Council raised its global corn estimate by 4 MMT to 917 MMT, but did leave the door open by stating if the U.S. corn crop continues to deteriorate they could adjust lower.
The weather forecast does show cooler temperature and more rain in the 8 to 14 day timeframe, but the market will wait for confirmation. Traders continue to build weather premium into the market.
Ethanol production for the week ending June 29 averaged 857,000 barrels/day. This is down 5.2% vs. last year. Corn used in last week’s production is estimated at 91.3 MB. Corn use needs to average 98.25 MB/week to meet this crop year’s USDA estimate of 5.05 BB. Stocks as of June 29 were 20.3 million barrels, which is down 2.2% vs. last week and up 9.3% vs. last year.
Crop conditions had 48% of the crop rated as g/e, 30% fair and 22% p/vp. Corn silking was at 25%, compared to 5% one year ago and the five-year average of 8%.
USDA’s Export Inspection Report was bearish for corn. There were 22.2 MB of corn reported shipped and below the 35.4 MB needed to meet USDA’s projection of 1.65 BB. This was within the pre-report estimates of 18 to 24 MB. The Export Sales Report for corn was 6 MB, of which .8 MB was old crop and below 11.8 MB that was needed to meet USDA projection of 1.65 BB. This was below the estimates of 7.9 MB to 19.7 MB and bearish for corn. Total shipments last week were at 25.4 MB and below the 36.9 MB needed this week.
Soybeans
As of close on July 5, November soybeans were up 98.75 cents. Short term fundamentals remain bullish for the soybean market as global stocks tighten due to potential production concerns. Weather remains the main force in the market.
Soybeans were higher throughout the session on July 2, reaching a new high before slipping to close with moderate gains, well off the daily high. The weekend saw some rain, but much of the Midwest remained dry while many locations also experienced record temperatures. The forecast remains hot and dry, though there are hints the weather could improve later in the month.
The soybean market is overbought technically, which could lead to a correction at some point. The USDA announced a sale of 1.19 million mt to an undisclosed destination, likely China, for 2012/2013 delivery. This is the fifth largest one day sale on record.
The July 3 session had soybeans hitting another new contract high overnight and closing the session a few cents off that high. Crop conditions were reduced by 8% in the July 2 Crop Progress report, providing support to the market. The USDA’s current yield estimate is 43.9 bpa, but some private estimates have been coming in below 40 bpa.
Export demand remains strong, as evidenced by the large sale on July 2. Weather remains a driving force, as the forecast remains hot and dry.
Soybeans hit a new contract high for the sixth time in the past eight sessions on July 5, closing well above $15 after sharp gains. Support continues to come from weather concerns as hot and dry conditions lead to decreasing yields.
Strong export demand is supportive to the market and is expected to continue. The soybean market ignored bearish outside markets as the U.S. dollar was sharply higher. The longer-term supply and demand outlook continues to grow more bullish.
USDA reported the soybean export inspections pace at 13.9 MB for the last week in June. This brings the year to date export shipments pace for soybeans to 1.22 BB compared to 1.42 BB for last year at this time. That week’s soybean export sales pace was estimated at 64.8 MB (11.0 MB old crop, 53.8 MB new crop). This brings the year to date export sales pace for soybeans to 1.383 BB compared to 1.536 BB last year at this time. With 9 weeks left in soybean’s marketing year, shipments need to average 12.8 MB and sales have exceeded USDA’s 1.335 BB projection.
Soybean blooming as of July 1 was at 26%, compared to the five-year average of 12%. USDA’s Weekly Crop Condition rating report estimated the U.S. soybean crop rating at 45% g/e, 33% fair, and 22% p/vp, a decrease of 8%.
Barley
USDA estimated the barley export shipments pace at 4,000 bushels for the last week in June, with all of the bushels going to Mexico. This brings barley’s year to date export shipments pace to 48,000 bushels compared to 310,000 bushels last year. There was no barely export sales reported for the last week in June. This brings the year to date export sales pace for barley to 3.9 MB compared to 100,000 bushels for last year at this time.
As of July 1, 61% of the nation’s barley was headed compared to 33% for the five-year average. Barley’s crop condition rating declined 5% to 61% g/e, 32% fair, and 7% p/vp.
Cash barley bids in Minneapolis jumped around last week but ended the week slightly higher with feed barley bids at $5.30 while malting barley bids remained at $6.50.
Durum
USDA estimated the durum export shipments pace at 1.491 MB for the last week in June with Algeria getting 284,000 bushels, Italy 814,000 bushels, and Venezuela 393,000 bushels. The durum export sales pace was estimated at 600,000 bushels. This brings the year to date export sales total for durum to 6.3 MB compared to 5.8 MB for last year at this time.
As of July 1, North Dakota’s durum crop was 69% headed compared to 16% for the five-year average. North Dakota’s durum crop condition rating decreased 9% to 83% g/e, 13% fair, and 4% p/vp.
Cash bids on July 5 for milling quality durum remained at $7.50 in Berthold while Dickinson’s bids were at $7.50.
Canola
Canola futures on the Winnipeg exchange closed the week ending July 5 with over $28.00 CD gains. The canola market was supported throughout the session by spillover support from a sharply higher U.S. soybean complex as well as from concerns toward emerging dry conditions in the major canola growing regions.
As of July 1, North Dakota’s canola crop was 83% in bloom compared to 37% for the five-year average. North Dakota’s canola crop condition rating decreased 7% to 86% g/e, 11% fair, and 4% p/vp. Minnesota’s canola crop is rating 60% g/e and 39% fair and 1% fair.
Cash canola bids on July 5 in Velva were at $26.31.
Sunflower
As of July 1, 2% of North Dakota’s sunflower crop was in bloom compared to 0% for the five-year average. North Dakota’s sunflower crop condition rating for sunflowers are at 80% g/e, 18% fair, and 2% poor.
The soybean oil export sales pace for the last week in June was estimated at 6.8 TMT, bringing the year to date total to 488.5 TMT, compared to last year’s 1,246.0 TMT.
Cash sunflower bids July 5 in Fargo were at $23.30.
