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Grain Hedge: Winter Storm Q Slams Southern Plains

Grain Hedge: Winter Storm Q Slams Southern Plains

25 February 2013

US - Winter Storm Q moved its way through the US last week leaving behind beneficial moisture in many areas that are in dire need of precipitation.

The beneficial precipitation had the effect of pressuring wheat contracts last week. Although wheat fell sharply last week, soybeans rallied and corn remained in its current range.

Corn closed at its lowest level since early January on Friday after failing to close solidly above $7 several times over the last few trade sessions. Friday’s action should get the bears excited with the next area of support coming in the $6.80 area, which was the low hit in early January.

Ethanol has improved over the last few weeks with last week's production improving 8,000 barrels per day to 797,000 barrels per day. Stocks of ethanol fell 5,000 barrels to about 19.5 million barrels. Cheaper corn and improving crush margins have aided this demand sector.

Estimates for export sales report are for 150,000-350,000 MT in sales combined for this year and next.

Soybeans rallied to recent highs last week mostly pressured by dry South American weather. The precipitation that was forecasted to hit the grain belt of Argentina and southern Brazil did not materialize into significant amounts. The front month contract has tried to test the $15 level only to fall lower each time.

Looking longer term, soybeans have traded between $13.50 and $15 for several months now. The market is currently at the higher end of the range and will need significant bullish fundamental news to move higher. Export sales were expected to fall into the 300,000-600,000 MT range.

Wheat moved sharply lower last week as beneficially moisture hit the areas that need it the most. Some areas of the Southern Plains have reported up to a 12 inches of snow.

These areas have been marred by drought for the better part of a year with yield potentials being significantly hampered. This moisture is much needed, but many areas need upwards of 8 inches of precipitation to alleviate the drought. So the snow is beneficial, but more is needed.

Export sales have been better lately and were expected to range from 400,000-600,000 MT in last week’s report. 

Weather has driven the wheat and soybean markets this week. Corn continues to meet resistance in the $7 area. The lack of precipitation in the Southern Hemisphere has rallied the soybean market, while snow/rain/sleet has allowed the wheat market to sell off. 

Top image via Shutterstock



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