Grains eyeing 2018 highs
The wheat market experienced very choppy trade but overall upward movement for the week. September reached a recent contract high of $6.5375 before retreating in May 23 trade. July Chicago also reached a recent high of $5.4525, while July Kansas City failed to reach its recent high of $5.685 by 4 cents.
Steady winter wheat conditions were the primary driver early week. Winter wheat conditions remained virtually unchanged with 36 percent good to excellent (unchanged), 29 percent fair (+1) and 35 percent poor to very poor (-1 percent) from last week. Trade was anticipating a 1 percent improvement. Winter wheat headed is at 61 percent versus the five-year average of 64 percent. Spring wheat plantings are at 79 percent versus the five-year average of 80 percent. Trade was anticipating 77 percent. Spring wheat emergence is at 37 percent compared to the five-year average of 52 percent.
The market is trading dry conditions in the U.S., Canada, Russia and Australia. Six to 10 and eight to 14-day forecasts show much warmer than normal conditions for both the northern and southern Plains. The six to 10-day forecast shows a greater chance for rain in the western Dakotas and western Nebraska. The eight-14 day forecast shows below normal chances for the southern Plains. The eastern Wheat Belt has normal to slightly above normal chances of rain.
It is good to pay attention to 2019 contracts. If we get upward movement and nearby contracts go higher, it is a good strategy to lock in some of next year's crop if prices are profitable.
The September Minneapolis 2019 contract reached $6.515 in May 22 trade. Last summer, when 2017 September Minneapolis ran to $8.00 levels on a drought, the 2018 September contract traded to a high of $6.89. There was about a week that producers could have locked in $6.80. There is always a market assumption that we will get bushels next year and its harder for deferred's to climb at the same pace. Every year is different but put September and December 2019 contracts on your radar screen.
The U.S. dollar exceeded $94.00 in May 23 trade. This is less of a factor now than weather, but is still an issue. If rain starts falling it could add to downside pressure. Look for continued choppy trade next week.
Weekly export sales for all wheat totaled 16.6 million bushels with 4.1 million bushels for the 2017-18 marketing year. This puts total marketing year sales at 871.3 million bushels, 16 percent below the previous marketing year. Marketing year shipments total 799 million bushels, 15 percent below the previous year.
For the week ending May 24, July contracts for Minneapolis wheat were up 5.75 cents at $6.3475, up 12 cents at $5.3025 for Chicago wheat, and up 10.25 cents at $5.49 for Kansas City wheat.
Corn futures continue to chug along as it follows the wheat and soybean markets higher. Corn may also be getting minor support from delayed planting in southern parts of South Dakota, Minnesota, Wisconsin and some northern areas in Iowa. They could start switching acres to soybeans if they can't get in before June. Southern Brazil's forecast shows another dry pattern coming in, which could put even more pressure on their parched crop.
On the flip side, recent scattered rainfalls have started to trim developing Midwest dry spots and is boosting germination in the acres already planted. Many areas still have subsoil moisture that is behind last year though. Temperatures are warm for all of the U.S. the next 14 days (as it has been the last few weeks). Precipitation is variable, with mostly above-normal precipitation in the southeast and northwest. The central Corn Belt and the hard red wheat belt is forecast to have below normal precipitation the entire 14-day forecast.
Corn planting progress as of May 20 showed corn was 81 percent planted versus 82 percent last year and 81 percent for the five-year average. Last week U.S. farmers were 62 percent planted. The trade was looking for U.S. corn planting to come in at 75 to 80 percent. This progress just goes to show how fast farmers can get seed in the ground, with many of the big farmers rotating shifts to keep the planters going 24 hours a day.
Crude oil pushed above $70 on May 7 and has been holding it ever since. Crude prices are at highs last seen in November 2014. Ethanol production for the week ending May 18 averaged 1.028 million barrels per day. Weekly ethanol production decreased 2.84 percent from last week and is up 1.78 percent from last year. Corn use for ethanol was 107.11 million bushels, above the 102.35 million bushels pace needed for the U.S. Department of Agriculture's estimates of 5.575 billion bushels. Ethanol stocks are at 22.129 million barrels, up 2.90 percent from last week and down 2.45 percent versus last year.
December corn matched the old contract highs that were set last July at $4.295. Corn prices are still technically in an uptrend. December support is at $4.165 then $4.0225. Major support is down at $3.925-$3.95. Commodity Futures Trading Commission data on May 15 showed the funds slightly decreasing their strong net long stance, moving from net long 212,000 contracts to net long 192,000 contracts. For the week ending May 24, July corn was up 2 cents and December corn was up 2.25 cents.
Soybeans were on fire and saw a 40 cent rally the first three days after news came out May 19 that the U.S. and China have come to an agreement to keep a potential trade war off the table for now. This supported the soybean market as the trade was willing to buy into the soy market with cautious optimism with the hope of easing trade tensions with China. Nothing is set in stone yet, but the two sides look to be coming to a deal that will shrink the U.S. trade deficit to China.
Treasury Secretary Steven Mnuchin said "the prospect of a trade war was on hold" following an agreement to suspend tariff threats. The U.S. and China have "agreed to keep talking" about measures under which China would import more U.S. energy and agricultural commodities to narrow the $335 billion annual trade deficit with China. President Donald Trump said on Twitter that China had pledged to buy "massive amounts" of U.S. agricultural products.
Soybean plantings are still ahead of pace, and as of May 20, soybeans were 56 percent planted versus 50 percent last year and 44 percent for the five-year average. Estimates were for 50-55 percent to be planted. As of May 20, soybeans were 26 percent emerged versus 17 percent last year and 15 percent for the five-year average.
Weekly export sales of soybeans showed total cancellations of 4.9 million bushels, including 5.1 million bushels for the 2017-2018 marketing year. This puts total marketing year sales at 2.028 billion bushels, 5 percent less than the previous marketing year.
November soybean resistance is still the April 2 high of $10.60 and if we break that, it's the January 16 high of $10.80. Support for November soybeans at $10.10 and then the psychological $10 mark. There is a gap down at $10.1575 that traders like to fill after they run the market for a while. CFTC data on May 15 showed the shrinking their net long positions, moving from net long 127,000 contracts to net long 108,000 contracts. For the week ending May 24, July 2017 soybeans were up 37.25 cents and November soybeans were up 39.25 cents.
For the week ending May 24, July canola futures in Winnipeg were up $6.60 at $539.00 per metric ton Canadian. The Canadian dollar was down .0004 to .7762. This brings the U.S. price to $18.98 per hundredweight.
• Velva, N.D., $18.75 per hundredweight, September at $17.62.
• Enderlin, N.D., $19.70 per hundredweight, September at $18.22.
• Hallock, Minn., $19.16 per hundredweight, September at $17.86.
• Fargo, N.D., $19.65 per hundredweight, September at $18.20.
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 New Salem, N.D., bid is $3.00.
Cash bids for milling quality durum are $6.00 in Berthold and at $5.50 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $18.00, and October at $18.75. For the week ending May 24, soybean oil was up 65 cents at $31.71 on the July contract.