Recovery after bearing report
Wheat futures started on the defensive early week with follow through selling from the bearish Aug. 10 World Agricultural Supply and Demand Estimates (WASDE) report which increased all U.S. wheat yields and production more than expected, which increased world ending stocks more than expected. Technical buying came into play at 50 percent retracement levels in the Chicago contract. $5.325 September Chicago held and the big test now will be $5.455 which is a longer term trend line support level. Matif wheat futures traded mostly lower but held $204.75 per metric ton September in both Aug. 13 and Aug. 15 trade.
Egypt purchased 420,000 metric tons of wheat from Russia and Romania for $246 to $250 per metric ton including freight. This sent futures lower in Aug. 15 trade on thoughts that U.S. export prices are simply too high to be competitive in world export markets. The U.S. dollar also approached $97.00 levels in Aug. 15 trade which hurt buying sentiment. The currency crisis in Turkey and the recent devaluation of the Russian ruble are continuing to give Russia and the Black Sea region the edge into the Egyptian market.
Australia's National Bank estimates that country's wheat crop at 18.4 million metric tons compared to 20 million metric tons last month and the U.S. Department of Agriculture's current estimate of 22 million metric tons. Eastern Australia is suffering from drought, but western Australia has had good growing conditions. The grain industry association of western Australia is estimating 9.9 million metric tons of wheat production in that region. Australian wheat has increased 20 percent in price in the last month.
Spring wheat conditions improved 1 percent last week to 75 percent good to excellent. Spring wheat harvest is at 35 percent compared to the five-year average of 27 percent. Reports of ergot in spring wheat from elevators in central North Dakota came in this week. A few of the reports showed .06 to .14 percent. Most reports point to average protein (13.5 — 14.5 percent) with higher levels in western and south central North Dakota. The Red River Valley is progressing well with harvest with good quality overall.
The latest Canadian drought monitor dated July 31 shows expanded D1 areas of drought in western Saskatchewan and eastern Manitoba since last month. Much of the heart of the wheat growing region is listed as D0 abnormally dry or D1 moderate drought with small pockets of D2 severe drought.
Weekly export sales for all wheat showed improvement totaling 29.5 million bushels (803,000 metric tons) for the 2018-19 marketing year. Total shipments plus outstanding sales of 306 million bushels are 25 percent below the previous marketing year. Weekly shipments of 17 million bushels put total shipments 36 percent below the previous year.
For the week ending August 16, September contracts for Minneapolis wheat were down 12 cents at $5.9675, down 4.5 cents at $5.4225 for Chicago wheat, and down 12.25 cents at $5.475 for Kansas City wheat.
Corn futures found some strength this week on the heels of the recoveries in wheat and soybeans. There has not been much bullish news since the USDA swamped us with negative news in the Aug. 10 report. With global commodities under pressure this summer, the opposite has happened to the U.S. dollar as it has surged up to levels last seen in June 2017. This does not help U.S. commodities on the global trade front as our products are more expensive to global buyers. For our competitors, the global farmers, input costs are cheaper as their currencies are on the decline.
Despite the higher dollar, weekly export data continues to stay strong and should help lower our stocks for the upcoming year, even though the USDA did not show this in the August report. A North American Free Trade Agreement deal or even an agreement between the U.S. and Mexico would only strengthen demand outlooks. It sounds like the U.S. is further along with negotiations with Mexico than they are with Canada
Crude oil futures have been choppy as of late. U.S. crude inventories were raised 6.8 million barrels in the week through Aug. 10. Many forecasters were estimating a decrease in stockpiles of 2.5 million barrels. Stockpiles of gasoline were down slightly more than expected, while inventories of distillate fuels, including diesel and home heating fuel, rose by 3.6 million barrels
Corn conditions have now declined for four consecutive weeks, but are still quite a bit higher (8 percent good to excellent higher) than last year's ratings for the same time last year. This year's crop is also seven to10 days ahead of average.
As of Aug. 12, corn crop condition ratings were 1 percent lower at 70 percent good to excellent. The rest of the crop is at 20 percent fair, and 10 percent poor to very poor. Average trade estimates were for a slightly lower rating. Corn was 26 percent dented versus 15 percent last year and 13 percent for the five-year average. Corn dough stage was at 73 percent versus 58 percent last year and 56 percent for the five-year average.
The six to 10 and eight to 14 day outlooks are not doing prices any favors as they cooled the forecasts down across the Midwest and are starting to put moisture back in the forecasts.
December corn held support of $3.6525 today before trending higher. Futures closed just shy of both the 20- and 50-day moving averages of $3.7575 and $3.7625. Resistance after that would be the recent July 31 highs of $3.885. Commodity Futures Trading Commission data on Aug. 7 showed the funds shrinking their net short stance, moving from net short 52,000 contracts to net short 30,000 contracts.
It is not often that international politics dominate grain prices in August, but apparently 2018 is one of those years. Bears and bulls have been sparring back and forth near the bottom end of 10-year lows, as buy the rumor, sell the fact is the mindset of the traders currently. What seems like the impossible for this time of year, weather is playing second fiddle to global politics.
News on Aug. 16 that China will send a delegation to the U.S. later this month to discuss stalled trade negotiations gave this market a late week boost. Due to trade tensions between the U.S. and China, farmers in Brazil intend to plant more soybeans at the expense of other crops such as sugarcane, whose prices are at near multi-year lows. News that a cargo of U.S. soybeans stranded in a Chinese port for 2 months will unload and pay the tariff also provided support. Brazilian soybeans have been at a $2.00 plus premium to gulf bids for months. The two competitors' prices are now getting close to being in line with each other, even after the U.S.'s 25 percent tariff on soybeans.
Soybeans also got positive news in the National Oilseed Processors Association July soybean crush as numbers were sharply above expectations, while soybean oil stocks were lower than expected. NOPA reported the soybean crush in July was 167.7 million bushels, sharply above average market expectations of 161.7 million bushels and above the highest trade estimate of 165.4 million. The seasonal trend is for the crush to decrease in July, not show the second highest monthly crush number for the 2017-18 marketing year. This was also the second highest monthly crush on record, shy of March's 171.9 million bushels. These U.S. numbers stem from Argentina's poor crop this past year as they were not able to keep up with demand. Argentina is the worlds No. 1 global soybean meal exporter.
Soybean crop condition ratings on Aug. 12 were down 1 percent to 66 percent good to excellent. The trade was expecting a 1 percent decline. The rest of the soybeans came in at 20 percent fair, and 10 percent poor to very poor. Soybean blooming is ahead of pace and as of Aug. 12, soybeans were 96 percent blooming versus 93 percent last year and 92 percent for the five-year average. Soybeans setting pods is at 84 percent versus 77 percent last year and 72 percent for the five-year average.
The six to 10 and eight to 14 day outlooks are not doing prices any favors as they cooled the forecasts down across the Midwest and are starting to put moisture back in the forecasts also. This is a perfect forecast for soybeans as they come to maturity.
For the week ending August 16, November canola futures in Winnipeg were up $5.50 at $510.40 per metric ton Canadian. The Canadian dollar was down .0012 to .7603. This brings the U.S. price to $17.60 per hundredweight.
• Velva, N.D., $15.87 per hundredweight, October at $15.87.
• Enderlin, N.D., $16.55 per hundredweight, October at $16.55.
• Hallock, Minn., $16.12 per hundredweight, October at $16.56.
• Fargo, N.D., $16.35 per hundredweight, October at $16.75.
Cash feed barley bids in Minneapolis were at $2.85, while malting barley received no quote. The Berthold, N.D., bid is $2.50 and the CHS Southwest New Salem, N.D., bid is $2.85.
Cash bids for milling quality durum are $4.80 in Berthold and at $4.95 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.35. October at $17.35. For the week ending August 16, soybean oil was up 6 cents at $28.15 on the September contract.