First time claims for unemployment benefits dropped by 6,000 in the latest week, but still remain at 472,000. Yet, the focus on Wall Street and Chicago's La Salle Street is squarely on tomorrow morning's highly anticipated monthly employment report and the approaching three-day holiday weekend. That put a cautious tone in the energy, equity and grain markets for much of today's trading session.
The exception was the wheat market, with more bullish fodder coming from Russia to keep money flowing. Russia's Prime Minister Putin indicated overnight that Russia will not lift its export ban before next harvest or November 2011, according to Russian news agencies. That should keep demand for US wheat strong over the next nine months to a year, but it's also bullish for US feed-grain exports. The extended ban is not a surprise considering ongoing drought impacting planting of the 2011 winter crop.
Commodity Weather Group reports that showers are starting to reach into some drier eastern sections of the Midwest, with parts of east-central Illinois and northern Indiana picking up .50" or better totals this morning. These showers will continue to fill in across much of the northeastern corner of the belt with amounts of .50 to 1" during the next 24 hours, while areas in west-central and south-western Ohio, central and southern Indiana and parts of eastern Michigan will be most likely to hang onto dry spots (about 10% of the soybean belt). There has been at least 20% of the soybean belt that has been impacted by the late-season dryness in the past few weeks, but these rains will help to confine the most severe yield impacts (15 to 20% reductions) to the remaining 10% of the soybean area as soybeans finish out with pod fill.
The wettest areas over the next 2 weeks will likely be in Minnesota, Iowa and Wisconsin, including the chance for 2 to 4" totals in many spots during the 6 to 10 day period. While the drier finish to August has helped to prevent any severe flooding threats, the rains will slow early harvest progress and threaten localized flooding with the heaviest amounts. Of course, harvest will be off to an early start, helping to ease concerns for now. Minnesota and Wisconsin have the best chance of ongoing wetness in the latter half of the month, while pre-planting moisture is still likely to be quite limited for many soft red wheat areas by month's end.
CWG notes that the former Soviet Union (FSU) winter wheat belt had significant showers in the northern Ukraine and the Central Region yesterday. The rains will taper off over the next few days across the northwestern quarter of the belt with widely scattered showers elsewhere. Showers in the 6 to 15 day period still look light and quite limited in the southeastern half of the belt. The rains have been sufficient to allow seeding in the northern half of the winter wheat belt in the past two weeks.
The tenuous area is in the northern Volga Valley where rains have only been 0.5 to 1.0". If there is little follow up rains then this could hamper stand populations in as much as 20% of the total wheat area. To the south where the dryness is still delaying planting the crop can go in as late as early October so there is still time to get seeding accomplished if rains return later in September. Germany should be on the dry side the rest of this week with just sprinkles in the far north. Rains will return next week and hold up the final stages of wheat harvest.
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Exporters sold 65.3 million bushels of corn in the week ending August 26, including net cancellations of 1.1 million old-crop bushels and new-crop sales of 66.4 million. That brings new-crop corn sales for the marketing year that began September 1 to 418 million bushels, with another 187 million old-crop sales that were undelivered.
Most of those undelivered bushels should be shifted to the new marketing year by next week, bringing new-crop sales to more than 600 million bushels and possibly as high as 650 million with new sales not yet registered in the books. That would put new-crop sales more than 200 million bushels above the early seasonal pace needed to reach USDA's target for the year.
Corn prices spent most of today's session in a 3-cent range, drifting as traders squared positions ahead of tomorrow morning's employment report and the approaching three-day holiday weekend. I expect volatility to increase again by Tuesday, or perhaps tomorrow if the employment report holds surprises one way or the other. However, today's focus was on limiting risk exposure ahead of the events.
December corn continues to target a test of $4.50 amid perceptions of declining yield prospects and strong demand. However, few traders want to push prices to new levels ahead of potential surprise in the jobs data or holiday weekend. Early harvest pressure limits gains, but outside money flow continues to offset much of the seasonal producer selling, keeping the market well-supported.
Exporters sold 22.5 million bushels of soybeans during the week ending August 26, with virtually all of them being new-crop bushels. USDA reports that 74 million old-crop bushels have been sold, but unshipped, as of August 26. Most of those should be shifted to the new marketing year that began September 1, bringing total new-crop sales for the first week of the new marketing year to nearly 600 million bushels. The aggressive new-crop bookings suggest that USDA's export target for the new marketing year is still 100 to 125 million bushels too low.
Soybean prices drifted in a narrow range for much of today's trading session as well, as traders position for the possibility of surprises in the days ahead. Strong demand continues to provide underlying support, while fears that yields may exceed USDA's 44-bushel national average yield provided pressure.
November soybeans tested support at $10, with selling interest drying up at that point. Overhead resistance is at the top of the recent range of $10.50. Soybeans face a bit more risk than corn of breaking lower due to seasonal pressure, with the next significant support at $9.50. Late buying lifted prices modestly higher, providing a bit of a safety net above $10 going into tomorrow morning's employment report that could impact money flow off Wall Street.
Commodity Weather Group expects rains to slow harvest in the Canadian Prairies during the first half of this month, especially in eastern Saskatchewan and Manitoba. Broader coverage remains possible for the belt in the latter half of the month. Given the already delayed state of this season's crop, early snow events will need to be watched for later in the fall. Frost was confined to western Alberta again this morning. Crops are safely maturing due to the later than normal frost that will occur this season.
CWG reports that showers yesterday remained confined to the northeastern fringes of Australia's western wheat belt. The storm activity will be concentrated across the eastern and southern wheat areas now through the next 10 days. The moisture will ensure very good conditions for heading crops and promote above normal yield potential. Early heading of the crop in dry southwestern areas will be stressed and subject to yield declines this month. The rain in the eastern areas will need to begin to let up after this month to avoid harvesting concerns. A strong La Nina will be enhancing rains for the next several months, which could lead to quality declines and harvest delays if the rains are too persistent.
Exporters sold 37.6 million bushels of wheat in the week ending August 26, down from 39.6 million the previous week and above the five-year average for the week of 21.4 million. Marketing year sales total 518 million bushels, 197 million or 61% from the previous year. Sales to date exceed the seasonal pace needed to reach USDA's export target by May 31 by 30 million bushels and the gap is rapidly growing.
Today's report that Russia has extended its export ban to November 2011 provided fresh headline fodder for investors, funneling additional money into the wheat pit. However, buying interest was limited by the approaching jobs data and three-day holiday weekend.
Wheat futures continue to be well above levels justified by the fundamentals, as long as the 2011 crop is established in good shape. However, money managers perceive that wheat is still under-valued and they still have the greater influence on market forces in the current environment. Today's news out of Russia simply continues to feed that perception, keeping wheat prices well-supported.
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