USDA report has mixed impact
The wheat market started the week under pressure as the Russian Ag Minister stated that 1.5 million metric tons of grain will be sold out of their reserves this month. The reason given was to lower storage costs. With the poorer quality they have experienced during harvest, this move was viewed by the trade as a gimmick to spur internal grain movement so they don't lose export market share.
Weekend rains over the Southern Plains were viewed as favorable for plant development with spotty areas that may require replanting. France received some weekend rains over a third of its currently dry wheat producing regions. Weather models are favoring rain in the next two weeks to help wheat before it goes into dormancy.
The wheat market rebounded higher in Oct. 9 trade on a U.S. Department of Agriculture announcement of 120,000 metric ton sale of spring wheat to Bangladesh for 2018-19. This saw all contracts have 6 to 7 cent gains in early session trade before backing off for slight gains.
The weekly crop progress report has 57 percent of the winter wheat crop planted compared to 54 percent for the five-year average. Thirty percent of winter wheat is emerged compared to 28 percent for the five-year average. This pace seemed to put the wheat complex on the defensive the rest of the week.
The Russian ag minister raised Russian wheat production estimates roughly 4 million metric tons to 68 million metric tons to 69 million metric tons prior to the release of the monthly World Agricultural Supply and Demand Report.
The monthly WASDE report pegged U.S. ending stocks at 956 million bushels versus the average trade guess of 950 million bushels and 935 million bushels in the September report. Production was increased 7 million bushels and imports were increased 5 million bushels. Feed and residual usage was decreased 10 million bushels and exports remained unchanged.
World ending stocks for 2018-19 are estimated at 260.2 million metric tons versus the average trade guess of 261.1 million metric tons versus 261.29 million metric tons in the September report. USDA lowered the Australian wheat crop only 1.5 million metric tons to 18.5 million metric tons despite the ongoing drought. Private analysts had been looking for a 3.5-million-metric-ton reduction. Russian wheat production was lowered 1 million metric tons to 71 million metric tons. Canadian and European Union wheat production remained unchanged from last month at 31.5 million metric tons and 137.5 million metric tons, respectively.
Weekly inspections totaled 15.6 million bushels for the week ending Oct. 4 which was within expectations. Marketing year inspections total 269.7 million bushels, 29 percent lower than last year and well below USDA's projected 14 percent increase. Export pace remains a bearish factor for the wheat market.
For the week ending Oct. 11, December contracts for Minneapolis wheat were down 1.75 cents at $5.895, down 13 cents at $5.08 for Chicago wheat, and down 10.5 cents at $5.1375 for Kansas City wheat.
Corn futures could not find any positive momentum early in the week ahead of the USDA report despite most of the Midwest receiving measurable amounts of rain that has slowed harvest. Momentum did switch to the positive side though as the USDA lowered the yield slightly in the Oct. 11 monthly report. The USDA's yield would still be a record at 180.7 bushels per acre, but this yield was lower than the USDA estimate of 181.3 bushels per acre in September. Average pre-report estimates were for a slight increase to 181.8 bushels per acre.
U.S. crop production is estimated to be 14.778 billion bushels versus 14.827 billion bushels in the USDA report and 73 million bushels less than pre-report average estimates. The USDA magically found 138 million extra bushels carryover from the final 2017-18 number. It seems like they just make their numbers work the way they want.
U.S. ending stocks for 2018-19 were raised and are estimated at 1.713 billion bushels compared to 1.774 billion bushels in September. Pre-report average estimates were for 1.932 billion bushels. The USDA lowered feed and residual use by 25 million bushels while boosting exports by 75 million bushels. Exports have been very strong, and the USDA finally is starting to factor that in. Better later than never. Early in the 2018-19 marketing year, inspections for 2018-19 totaled 228.6 million bushels, up 62 percent from the previous year and well above the USDA's projected 1.5 percent increase in exports. World ending stocks for 2018-19 were raised and are estimated at 159.3 million metric tons, up from 157 million metric tons in September and close to the average trade expectations.
It was a disappointing early week trade lower for corn as the year-round E15 announcement didn't give this market any life. President Donald Trump announced the lifting of a ban on summer sales of E15 at a closed-door meeting at the White House on Tuesday afternoon. According to Reuters, "the announcement caps a months-long effort by the White House to thread the needle between rival corn and oil industry interests in an attempt to boost ethanol demand while cutting compliance costs for refiners. In the end, Trump is moving ahead without the support of the refining industry, who wanted more in return for agreeing to lift the summer ban. Some estimates suggest corn demand could increase by some 2 billion bushels annually."
That number seems a bit steep, but this announcement is definitely a positive announcement for corn farmers. The more important part for ethanol that wasn't discussed is what they are going to do with the biofuel credits, or Renewable Identification Numbers. For this E15 news to matter much, the waivers that were granted by ex-EPA head Scott Pruitt to refiners need to get cut back. At the heart of the matter is Trump directing the EPA to grant the summertime waiver. The ethanol industry has stated the EPA has authority, but the EPA has been reluctant to grant the waiver. Oil interests have threatened legal action as they view such policies should have come from Congress.
Harvest is ahead of the five-year average for corn, but that is most likely due to farmers waiting for soybeans to dry down have just switched to taking out corn when they can. As of Oct. 9, corn crop condition rating were down 1 percent at 68 percent good to excellent. The rest of the crop is at 20 percent fair and 12 percent poor/very poor. Corn was 34 percent harvested versus 21 percent last year and 26 percent for the five-year average.
Soybean futures were under pressure this week in anticipation of higher yields. Soybean yields were higher, but less than expected. This gave the soybean complex some support on Thursday afternoon after early week weakness. Soybeans yields came in at 53.1 bushels per acre, 0.3 bushels per acre higher than the September report but slightly less than the average pre-report estimates. Pre-report estimates were all over the board ranging from 52 to 55 bushels per acre. All in all it was not a friendly report for soybeans, but futures turned positive after the report and stayed in the green into the close. Ending stocks continue to rise, and it is no secret that this is largely due to the trade spat with China.
Production was slightly lowered to 4.69 billion bushels versus pre-report estimates of 4.733 billion bushels and 4.693 billion bushels in the September report.
Ending stocks for 2018-19 numbers are expected to be 885 million bushels versus 845 million bushels in the September report and 25 million bushels larger than pre-report estimates.
Exports were unchanged at 2.06 million bushels. USDA increased carryover from the 2017-18 crop 43 million bushels, but dropped production by 3 million bushels due to a 600,000-harvested-acres decrease to 88.3 million acres. World stocks for 2018-19 were raised roughly 1.7 million metric tons from the September report to 110 million metric tons and larger than the pre-report estimates of 109.4 million metric tons.
Wet weather has delayed soybean harvest across the Midwest. The Upper Midwest is soaked, and it will be highly unlikely most farmers will get much harvested through the weekend. Precipitation from 2 inches to 5 inches has been common this past week where crop is in the field. The Midwest looks to clear up for the next week, but that won't matter much unless it warms up and the sun starts shining. Heavy snows fell across North Dakota and northern Minnesota. Snowfall of up to 13 inches fell in a large areas surrounding Valley City, N.D. There are numerous reports of lodged soybeans with this snow and a number of reports of soybeans sprouting and shattering in Midwestern fields due to the wet weather pattern.
Soybeans harvested were at 32 percent as of Oct. 7, versus 34 percent last year and 36 percent for the five-week average. Progress is expected to fall further behind average after this past week's weather. Soybean crop condition ratings on Oct. 7 were unchanged at 68 percent good to excellent. The rest of the soybean crop came in at 22 percent fair and 10 percent poor/very poor.
November soybeans support is at the 10-year lows set on Sept. 18 of $8.1225 and the summer lows set July 16 of $8.2625. The psychological $8 mark and then $7.7625 lows set back in December 2008 are major support after that. November soybeans continue to jump around on both sides of the 50-day moving average of $8.59. Next resistance is the past month highs of $8.7575. Major resistance is the end of July's high of $9.2225. For the week of Oct. 11, November soybeans were down 10.75 cents.
For the week ending Oct. 11, November canola futures were down $4.80 at $496.50 Canadian per metric ton. The Canadian dollar was down .0063 to .7664. This brings the U.S. price to $17.26 per hundredweight.
• Velva, N.D., $15.69 per hundredweight, November at $15.86.
• Enderlin, ND, $17.94 per hundredweight, November at $17.94 (Nexera).
• Hallock, Minn., $16.57 per hundredweight, November at $16.67.
• Fargo, ND, $16.70 per hundredweight, November at $16.65.
Cash feed barley bids in Minneapolis were at $2.60, while malting barley received no quote. Berthold, N.D., bid is $2.50 and CHS Southwest New Salem, N.D., bid is $2.45.
Cash bids for milling quality durum are $4.50 in Berthold and at $4.50 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.25, and November bids were at $17.25.
For the week ending Oct. 11, soybean oil was down 35 cents at $28.73 on the October contract.