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Erin Brown / Grand Vale Creative

The U.S. dollar is surging

Wheat

The wheat market started the week in defensive mode primarily on thoughts of rain forecast for both Kansas City and Minneapolis wheat belts in the next five days. Both six to 10 and eight to 14 day forecasts called for warmer and wetter weather through the heart of the winter wheat growing region. Both forecasts also called for warmer and drier conditions across the heart of the U.S. spring wheat area. Weather model runs lessened rain chances in the Kansas City belt for the eight to 14 day forecasts on May 15, which helped lead to gains the rest of the week. July Minneapolis held support at $6.00 and July Kansas City held support at $5.08.

Winter wheat ratings improved 2 percent in the good to excellent category and now stand at 36 percent compared to 51 percent last year. Poor to very poor conditions went from 37 percent to 36 percent this week versus 17 percent last year. Winter wheat headed is at 45 percent compared to 53 percent for the five-year average. Spring wheat planting progress is at 58 percent with trade expecting 45-50 percent. This compares to the five-year average of 67 percent. Spring wheat emergence is at 14 percent compared to 36 percent for the five-year average.

In evaluating the numbers from last week's U.S. and Canadian reports, the one thing that stuck out was the Canadian wheat stocks number coming in at 16.4 million metric tons when trade was expecting 19.9 million metric tons. That's 3.5 million metric tons difference. If you recall last August when we had the dagger report that sent everything down — in that report the U.S. Department of Agriculture increased Russia's wheat crop about 8 million metric tons. It was one of the largest 30-day increases that I've ever seen. So we just saw an adjustment of about half of that to the price-friendly side. With the northern spring wheat belt on the dry side, this number does support the Minneapolis market staying above $6 futures until weather can prove that the U.S. and Canada can at least get an average crop in 2018.

The U.S. dollar surged higher this week from $92 levels to $93.50. The Euro continued its downtrend in the last four sessions to the 118 Euro range. This is helping French wheat exports. Egypt was in the market this week for the first time since late March, but in the end only purchased one cargo from Ukraine at $220 per metric ton.

Weekly export sales for all wheat totaled 7.2 million bushels with 2.3 million bushels for the 2017-18 marketing year. This puts total marketing year sales at 867.2 million bushels, 16 percent below the previous marketing year. Marketing year shipments total 785.7 million bushels, 14 percent below the previous year.

For the week ending May 17, July contracts for Minneapolis wheat were up 9.75 cents at $6.1475, down 1.25 cents at $4.975 for Chicago wheat, and up 1 cent at $5.19 for Kansas City wheat.

Corn

The corn market held its own this week over concern of losing acres in the southern Minnesota and northern Iowa corridor that has experienced wet conditions in May. Late planting deadlines are looming on May 31 for that area and even if it is planted, we would be likely looking at reduced yields.

A private analyst lowered Brazilian corn crop estimates 3 million metric tons to the 78 to 81 million metric tons range from 81 to 84 million metric tons previously due to dry weather in early May. USDA is currently estimating 87 million metric tons.

Ethanol production for the week ending May 11 was up 3.02 percent from last year at 1.058 million barrels per day or 7.406 million barrels per week. Production has been running 2 percent above average four of the last six weeks and is setting the stage for good year-over-year increases into mid-June.

Weekly ethanol stocks declined 19 million gallons to 903 million gallons. This is the largest year-over-year difference (-8 percent) since December 2016. It is typical for stocks to decline from April to August during the summer driving season, but this is an impressive drop. 2018 U.S. gasoline demand is up 2.8 percent since January 1 and continues to be on the upper end of the five-year average. Weekly gasoline stocks declined 3.79 million barrels to 232.01 million barrels which was 2.39 million barrels lower than the average trade guess. Crude oil stocks also declined higher than expected to 432.35 million barrels.

U.S. ethanol exports have increased from around 400 million gallons in 2010 to 1.4 billion gallons in 2017, an increase of 1 billion gallons. If there is a disincentive to blend 1.4 billion gallons a year, allowing E-15 to have a summer time waiver like E-10 is a moot point. As crude oil prices continue to climb, 1.4 billion gallons less in domestic supply will lead to higher wholesale gasoline costs for the consumer.

Soybeans

All of the old crop soybean contracts broke below $10 late in the week and saw its lowest close since the beginning of February. November soybeans are knocking on the door to join the sub $10 club. It has been a choppy trade lately, but the trend in May has been down. November soybeans have lost 54.5 cents since the April 30 highs. Demand worries regarding China continue to haunt the soybean complex. The U.S. dollar trading to its highest level for the 2018 calendar year is not helping matters either.

It has been "buy the rumor, sell the fact" in the soybean complex as futures continue to chop around as rumors continue to fly out from the U.S.-China trade negotiations. One second you hear that they are close to a deal, and then someone with inside knowledge will give a conflicting report. Volatility will continue in this complex until there is a trade agreement in place, or the worst-case scenario would be if they don't get an agreement hammered out.

As of May 13, soybeans were 35 percent planted versus 29 percent last year and 26 percent for the five-year average. Estimates were for 28 to 32 percent to be planted. This year's pace is 9 percent ahead of the five-year average, and that pace was likely to continue this past week. One thing that is interesting about this planting progress report is that it may show how many areas may be below average rainfall for the month of May. On the flip side, we are also starting to hear concerns in southern South Dakota, Minnesota, Wisconsin and northern Iowa about corn acres getting switched to beans if they can't get the planters moving in the next 10 days.

Informa Economics is estimating 2018 U.S. soybean acres will reach 89.4 million acres, above USDA estimates of 89.0 million acres. Argentina continues to see wet weather that is still delaying the last half of their harvest, which seems to be getting smaller all the time.

November broke first support at $10.10 and is now looking at the psychological $10 mark. November soybean resistance is still the April 2 high of $10.60 and if we break that it is the January 16 high of $10.80. Commodity Futures Trading Commission data on May 8 showed the funds liquidating many of their positions, moving from net long 177,000 contracts to net long 127,000 contracts. For the week ending May 17, July 2017 soybeans were down 8.25 cents and November soybeans were down 10 cents

Canola

For the week ending May 17, canola July futures in Winnipeg were up $0.3 Canadian to $532.6 per metric ton Canadian. The Canadian dollar traded down slightly to 0.7814. This brings the U.S. price to $18.88 per hundredweight.

• Velva, N.D., $18.69 per hundredweight, September at $17.42.

• Enderlin, N.D., $19.64 per hundredweight, September at $18.02.

• Hallock, Minn., $18.86 per hundredweight, September at $17.66.

• Fargo, N.D., $19.55 per hundredweight, September at $18.05.

Barley

Cash feed barley bids in Minneapolis were at $2.85, while malting barley received no quote. The Berthold, N.D., bid is $2.60 and the CHS Southwest bid is at $3.00 in New Salem, N.D. Barley plantings are at 26 percent nationally versus 31 percent planted last year and the five-year average of 44 percent planted.

Durum

Cash bids for milling quality durum are $6.00 in Berthold and at $5.50 in Dickinson, N.D.

Sunflower

Cash sunflower bids in Fargo were at $17.90, and October at $18.75. For the week ending May 17, soybean oil was down 37 cents to $30.94 on the July contract.

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