Tariff implementation affects markets
The wheat complex started the week in the red in follow through selling to the June 29 quarterly report that showed spring wheat acreage at 13.2 million acres compared to the average trade guess of 12.41 million acres. All U.S. wheat acres came in at 47.82 million acres compared to the average guess of 47.12 million acres versus 47.34 million from the March intentions report.
All wheat quarterly stocks for June 1 are estimated at 1.1 billion bushels which was right at the average trade estimate of 1.098 billion bushels. This compares to 1.494 billion bushels from the March 1 estimate.
Stats Canada's Principal Field Crop report, also released June 29, put all wheat acres at 24.7 million, up 10.4 percent from the 2017 total of 22.39 million acres. Trade had expected 24.8 million acres. The gain was driven mostly from a 9.5 percent increase in spring wheat seeded area, which increased by 1.5 million acres. Durum acres rose by 980,400 acres, an increase of 18.8 percent from last year.
Mid-week, the wheat complex saw double digit gains on declines in German and European Union wheat estimates and lower export estimates from the Black Sea Region. The German farm association DBV estimates production at 20.5 million metric tons compared to 24.1 million metric tons in 2017. Another wire service poll showed an average estimate of overall EU wheat production at 145.1 million metric tons versus 151.1 million metric tons last year.
EU wheat exports are expected to increase to 25.4 million metric tons compared to 22.2 million metric tons last year. The same wire service poll showed an estimated Black Sea Region wheat export number of 58.8 million metric tons compared to 67.3 million metric tons last year and the U.S. Department of Agriculture's current estimate of 60 million metric tons.
For the week ending July 5, September contracts for Minneapolis wheat were up 11 cents at $5.475, up 3.75 cents at $5.055 for Chicago wheat, and up 14.75 cents at $5.0325 for Kansas City wheat.
For the week ending July 5, September corn was down 7.25 cents at $3.5225, and December corn was down 6.75 cents at $3.645. Informa estimates a national U.S. corn yield average of 176 bushels per acre versus USDA's current estimate of 174 bushels per acre. This would equate to a 14.392 billion bushel crop.
There was a report out questioning China's planned move to a 10 percent ethanol fuel standard by 2020. The report mentioned that only one of the proposed plants has been approved for construction, and three others have not yet gained governmental permits. This leads to speculation that China may be backing off on their proposed E10 standard.
The European Union threatened tariffs on imported biodiesel from Argentina upon accusations that Argentina was unfairly subsidizing that industry. The threat of these tariffs stopped Argentine biofuel sales to the EU and places that country's biofuels industry in great peril, as over 75 percent of Argentine biodiesel would be without a market. D-6 Renewable Identification Number credits increased 3 cents to 25 cents upon news of EPA administrator Scott Pruitt's resignation.
Ethanol production for the week ending June 29 averaged 1.067 million barrels per day, down 0.47 percent from last week and up 5.23 percent from last year. This brought weekly production to 7.469 million barrels. Corn used in last week's production was at 111.17 million bushels. Stocks as of June 29 were 21.975 million barrels, up 1.39 percent versus last week and 1.87 percent versus last year. Ethanol plant profit margins have been in the 15 cents per gallon range the last few weeks based on Iowa average prices. Ethanol futures have been range-bound since mid-June between $1.39 to $1.44 per gallon.
Weekly petroleum data showed crude oil stocks rising more than expected at 417.88 million barrels. Gasoline stocks declined to 239.69 million barrels, which was a larger decline than trade expectations. Gasoline demand posted another near record week at over 185 million barrels per day.
In what is starting to sound like a broken record, soybeans were under pressure once again this week as a full out trade war could be on the horizon. The trade has been in a wait-and-see mode heading into the July 6 tariff deadline. The 2 percent decline in crop ratings this past week could not help this bearish market. July 6 is the day the tariffs will be put in place, so barring a good piece of negotiating between the two sides, that will be the official start of the tariff war. U.S. tariffs are set to take effect on $34 billion of Chinese goods plus additional tariffs if China retaliates. China has announced it will immediately implement retaliatory tariffs on U.S. goods, which could include soybeans. Even a recovery week in the corn and wheat complexes wasn't enough to sneak soybeans into the green this week.
One small positive note that came out of the Commodity Futures Trading Commission report was that commercials turned net-long in soybeans for the first time since February, meaning they are looking at soybeans as a decent deal. On the other side of things, CFTC data on June 29 showed the funds net short for the second week in a row, moving from net short 13,000 contracts to net short 44,000 contracts. They were net long 193,000 contracts in May. For the week ending July 5, August and November soybeans were down 24.25 cents.
Crop ratings dropped 2 percent in the good to excellent ratings in the weekly crop progress report due to flooding in parts of Minnesota, Iowa and Wisconsin. Southern Minnesota continues to receive heavy rainfalls again with some areas in southwestern Minnesota receiving up to 10 to 14 inches of rain. The eight-to-14-day forecast is drier in the western and central Midwest but normal to slightly above normal precipitation in the eastern Corn Belt. Temperatures are forecast to be above normal in both the six-to-10-day and eight-to-14-day forecasts.
Pro Ag yield models showed a minor decline of yields for soybeans, the first significant decline since June 11 (when ratings began). Michael Cordonnier left his U.S. yield estimate unchanged at 51 bushels per acre with a neutral bias for the summer.
For the week ending July 5, November canola futures in Winnipeg, Manitoba, were down $4.50 at $504.90 Canadian per metric ton. The Canadian dollar was unch at .7608. This brings the U.S. price to $17.43 per hundredweight.
• Velva, N.D., $16.55 per hundredweight, September at $16.55.
• Enderlin, N.D., $17.14 per hundredweight, September at $17.14.
• Hallock, Minn., $16.76 per hundredweight, September at $16.76.
• Fargo, N.D., $17.70 per hundredweight, September at $17.45.
Cash feed barley bids in Minneapolis were at $2.85, while malting barley received no quote. Berthold, N.D., bid is $2.60, and CHS Southwest New Salem bid is $3.
Cash bids for milling quality durum are $5.60 in Berthold and at $5.20 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $18, October at $18.40.
For the week ending July 5, soybean oil was down 62 cents at $28.47 on the July contract.