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Published June 15, 2015, 09:47 AM

Markets: Grains retreat following report

Wheat started last week with solid gains, but slipped lower after the release of the U.S. Department of Agriculture’s June Crop Production report. Corn struggled last week, with a lot of negative news thrown at the market. The USDA report showed larger-than-expected world stocks, with larger production estimates in South America. As of the June 11 close, July soybeans were 2.25 cents higher for the week while November soybeans were down 5.5 cents. At 10 a.m. June 12, July soybeans were down 1.25 cents and the November contract was down 5.25 cents.

By: Ray Grabanski,

Wheat

Wheat started last week with solid gains, but slipped lower after the release of the U.S. Department of Agriculture’s June Crop Production report. For the week ending June 11, July Minneapolis lost 8.75 cents, September Minneapolis dropped 9.25 cents, July Chicago was off 12.75 cents and July Kansas City gave back 12 cents.

Traders are concerned about growing conditions, not only in the U.S., but abroad. The U.S. has been experiencing extremely wet conditions across the major wheat growing regions. In the North, that has not been such a bad thing, but in the South, where harvest activity should be occurring, it is. Traders are extremely concerned about disease outbreak in much of the wheat in Oklahoma, Texas and Delta states. News of dry conditions in parts of Canada, Russia and China has started to creep into the market.

The last two sessions of the week, wheat traded on the defense, with technical selling and profit taking the main feature. Light selling was also because of USDA’s Crop Production report. The report was virtually a nonevent coming in, about as expected. For the 2014 crop, USDA decreased supply by lowering wheat imports 2 million bushels. Demand declined 5 million bushels because of a reduction in exports. The net result was a 3-million-bushel increase in stocks, now estimated at 712 million bushels (which was also what the trade expected). For 2015, USDA increased wheat’s potential yield 0.7 bushels, which, along with the higher 2014 ending stocks, resulted in a 36-million-bushel increase in supply. On the demand side, USDA increased feed demand 15 million bushels. The net result was a 21-million-bushel increase in wheat’s ending stocks estimate, now estimated at 814 million bushels (which came in 16 million bushels higher than trade expectations). As for the world estimates, wheat stocks came in close to expectations. In the end, the report did not show anything new.

Export demand continues to be a thorn in the side for wheat. Reports had Egypt buying 60,000 metric tons of Russian wheat June 11. Losses were kept in check by weather forecasts calling for heavy weekend rains for the Southern Plains. If realized, it could severely hamper harvest activity.

As of June 7, 97 percent of the nation’s spring wheat crop had emerged, compared with 91 percent the previous week and 80 percent for the five-year average. Spring wheat’s crop condition rating decreased 2 percent to 69 percent good to excellent, 26 percent fair and 5 percent poor or very poor. Ninety-one percent of the nation’s winter wheat crop was headed, compared with 84 percent the previous week and 84 percent for the five-year average. Winter wheat harvest is 4 percent complete, compared with zero the previous week and 12 percent for the five-year average. Winter wheat crop conditions declined 1 percent to 43 percent good to excellent, 37 percent fair and 20 percent poor or very poor.

Corn

Corn struggled last week, with a lot of negative news thrown at the market. The USDA report showed larger-than-expected world stocks, with larger production estimates in South America. The dollar showed strength and more rain fell throughout the country. There is some talk that excessive moisture in the western Corn Belt might leave the area with some prevented-planting acres and marginal stands, but the eastern Corn Belt is in good shape. The market is currently trading the adage that “rain makes grain.” The weather will continue to drive the market until the stocks and acreage report comes out on June 30. As of the June 11 close, the May contract was down 4 cents for the week, while December lost 3.75 cents.

The corn futures started the week with small gains with spillover support from the wheat complex. Additional support came from rain in the forecast for the Southern Plains and there are still approximately 1.5 million acres of corn to be planted, in addition to replanting. Traders were expecting a slight uptick in the condition ratings for last week’s report. The good to excellent remained unchanged for the third week in a row at 74 percent, while poor or very poor increased by 1 percent to 4 percent.

Selling pressure returned on June 10 with the monthly USDA report showing world stocks much larger than expected. USDA estimated 2014 to ’15 ending stocks at 1.876 billion bushels, up 25 million with a reduction in ethanol use because of efficiency. New crop was raised by 25 million bushels, with the adjustment in old crop, to 1.771 billion. USDA made no changes to new-crop demand. That puts the old crop stocks-to-use ratio at 13.8 percent. The big changes came in the world stocks with old crop being raised 4.5 million metric tons to 197 million and new crop up 3.3 million to 195.2 million. The increase came from larger crop estimates in South America.

For the week ending June 7: corn emerged was at 91 percent versus 90 percent last year and the five-year average of 90 percent. The crop was rated 74 percent good to excellent, 22 percent fair and 4 percent poor.

Soybeans

As of the June 11 close, July soybeans were 2.25 cents higher for the week while November soybeans were down 5.5 cents. At 10 a.m. June 12, July soybeans were down 1.25 cents and the November contract was down 5.25 cents.

Soybeans began the week higher, as traders took advantage of prices near five-year lows. Gains in corn and wheat futures and rain in the forecast provided support. Rains in the Corn Belt have hindered planting, with the crop progress report showing Kansas and Missouri at 31 percent and 30 percent planted, respectively, well behind the five-year average pace. The additional rains could lead to lost acres if the crop can’t get into the field by the end of the month. Overall, planting is just a little behind the five year average, while emergence is just ahead.

Last week brought the first condition ratings of the year, and soybeans came in at 69 percent good to excellent. June 12 export inspections came in above the amount needed to keep pace with USDA’s projection. With 12 weeks left in the marketing year, soybean inspections are up 12 percent from last year at this time, a larger increase than the 9 percent expected by USDA. June 9 saw traders positioning ahead of the June 10 World Agriculture Supply and Demand report, with decreases expected in domestic and global new crop ending stocks and an increase expected for Argentinian production.

Soybeans were trading a few cents lower June 10 ahead of USDA’s report. That brought a smaller ending stocks estimate for domestic new-crop soybeans, as expected. The new estimate came in at 475 million bushels, down from 500 million in May’s report. The biggest surprise was a drop in estimated world new-crop ending stocks to 93.2 million metric tons, compared with 96.2 million last month.

As many expected, Argentina’s production increased 1 million metric tons to 59.5 million. Brazil’s production estimate was unchanged at 94.5 million metric tons. Weakness in corn and wheat futures after the report helped keep the pressure on soybean prices. USDA announced a sale of 128,500 metric tons of soybeans to unknown destinations June 10.

Soybeans moved lower June 12, with large soybean supplies expected this year. Planting has been slow in some regions, and there is more rain in the forecast for the Southern Plains, but still traders expect the percentage of acres unplanted last week to be limited. The WASDE report showed a drop in world new-crop carryout to 93.2 million metric tons, compared with 96.3 million expected, but even this lower number is still 10 million metric tons higher than the previous record. June 11 export sales came in at 6 million bushels, adding to a total that exceeded USDA’s estimate a number of weeks ago.

For the week ending June 7, soybeans were 79 percent planted, compared with 71 percent the previous week and 81 percent for the five-year average. Emergence was at 64 percent, compared with 49 percent the previous week and the five-year average of 63 percent. Soybean condition ratings were at 69 percent good to excellent, 26 percent fair and 5 percent poor or very poor.

Barley

For the week ending June 7, barley conditions were rated at 76 percent good to excellent, 22 percent fair and 2 percent poor or very poor.

The WASDE report showed little change for barley, with a small reduction in estimated ending stocks to 77 million bushels, compared with 78 million in last month’s report.

For the week ending June 11, cash feed barley bids in Minneapolis were at $2.60, and there was no bid for malting barley.

Durum

Durum export sales for the week ending June 6 were reported at 200,000 bushels. This brings the year-to-date export sales pace for barley to 6.6 million bushels, compared with 4.7 million last year at this time.

Ending stocks for durum were unchanged from last month’s WASDE report at 16 million bushels.

For the week ending June 10, cash bids for milling quality durum were at $8.75 per bushel in Berthold, N.D., while the Dickinson, N.D., bid was at $8.75.

Canola

For the week ending June 10, the front month July canola contract lost $8.40 to $488.60 (Canadian). Canola futures started the week lower and extended the losses as the week went on. Chicago Board of Trade soyoil futures were lower every day last week, keeping pressure on canola. Losses in other oilseeds and strength in the Canadian dollar added to the negative tone.

June 8 Canadian Oilseed Processors Association crush was 154,048 metric tons, the largest weekly crush in 10 weeks and more than needed to keep pace with the projection. June 9 saw traders positioning ahead of the USDA report that put pressure on canola by way of a lower CBOT soy complex. The canola market continued to work its way lower June 10, as traders wait for fresh news, particularly about the crop in Western Canada.

For the week ending June 11, cash canola bids in Velva, N.D., decreased 10 cents to $17.97 per hundredweight.

Sunflowers

USDA estimated soybean oil export sales pace for the week ending June 6 at 3.4 thousand metric tons. This brings the year-to-date export sales pace for soybean oil to 740.8 thousand metric tons, compared with 726.7 thousand metric tons for last year.

For the week ending June 7, sunflowers were 69 percent planted, up from 49 percent the previous week and the five-year average of 47 percent.

For the week ending June 11, July soybean oil futures were $1.49 lower to $33.29. Cash sunflower bids in Fargo, N.D., were down 15 cents on the week at $21.20 per hundredweight.

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