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Spring wheat leads the way

Wheat

We thought this could happen and we've been writing about it since last fall. The odds of the five major wheat producing countries all having a repeat of 2016 record yields were very low. In 2017, the pendulum is swinging wildly the other way.

Currently the key wheat growing regions of western Australia are experiencing drought. The Ukraine and Europe have been experiencing drier than normal conditions. Canada and the northern U.S. are experiencing moderate drought. World weather has changed dramatically in just three months.

The big tell for us, was when this market thought it could get cute by shifting spring wheat acres into a normally drier climate in Montana. If you ran the numbers, the odds of a trend line yield in spring wheat were not in the cards. The market failed to bid up Minneapolis wheat prices this spring when it needed to do so the most, as federal crop insurance guarantees clearly favored soybeans. It wasn't even close.

We also had a Stats Canada planting intentions report that stated both canola and spring wheat acres would be planted at record levels in the great north. This was on top of reports that a full 2 million acres of Canadian crop land remained unharvested from last fall. We can all take solace that the U.S. government isn't the only one in the world that can't count.

The market probably assumed that Montana would cure the problem of high bushels and low protein by making a half a million acre switch from winter wheat to spring wheat. It also likely assumed Canada would have benign weather, but assuming normal after four seasons of good weather was a bad bet.

June 12 condition ratings for the six major producing states dropped 10 percent to 45 percent good to excellent compared to 55 percent last week. Poor to very poor conditions increased to 20 percent, up from 11 percent last week. This was one of the largest week to week drops in 30 years. Eastern North Dakota and Minnesota caught rains earlier this week so look for ratings to moderate next week. The rains were spotty so open interest in Minneapolis contracts remains high.

Corn

Corn backed off 20 cents from its June 8 highs, but considerable buying came in June 15 trade to limit the drop for the week. The National Oceanic and Atmospheric Administration released their 30 and 90 day weather forecasts that call for above normal temperatures and normal precipitation. With late planting in the Eastern Corn Belt extending the pollination timeframe in the U.S., traders viewed buying this break as a bargain.

Weekly corn condition ratings were 67 percent good to excellent compared to 68 percent last week and 75 percent last year. Poor to very poor ratings were 8 percent compared to 6 percent last week and 4 percent last year. Corn emergence is at 94 percent nationally versus the 5-year average of 94 percent.

Progressive Ag's yield model currently shows below trend line yields based on these numbers. Option expiration is June 23 with the planting intentions report on June 30. These reports along with weather should make for volatile trade going into the July 4 holiday weekend.

Weekly ethanol production averaged 1.002 million barrels per day. This was up 0.3 percent versus last week and down 1.09 percent versus last year. Stocks as of June 9 were 22.542 million barrels. This is up 2.55 percent versus last week and up 6.42 percent versus last year. Corn used in last week's production is estimated at 105.21 million bushels. Cumulative corn used for ethanol production for this crop year is 4.31 billion bushels. Corn needs to average 96.521 million bushels per week to meet USDA's estimate of 5.45 billion bushels.

Soybeans

Soybeans continue to mull around as this market is still trying how to react to the big soybean crop in South America, but a poor start to the growing season in the U.S. The second crop ratings of the season on June 19 will give us a good idea how much spotty rains seen this past week have helped early soybean development.

The market is concerned with a weather pattern that thus led to below average precipitation and mostly above normal temperatures. The forecast moderates that somewhat, but the concern remains that we fall back into that pattern for the next few months — critical months in the development of U.S. crops. For the week ending June 15, July soybeans were down 6.75 cents and November 2017 soybeans were down 4.25 cents.

The Pro Ag yield model is showing a smaller projected yield than USDA trend yields. This is friendly to soybeans as the crop is below average, and if dry conditions prevail for a few weeks, the yield potential could decline significantly into the heart of the growing season. The market is reflecting concern about the 2017 crop, as we have started out with below average yield potential in corn, soybeans, and hard red spring wheat.

We still have a long season ahead of us, and how widespread moisture coverage is will determine the direction of this market ahead of option expiration on June 23. Upside may be limited until we find out if the USDA will increase its planted acres number on the June 30 acreage report. Informa puts U.S. soybean acres at 89.4 million bushels, down 120,000 bushels versus USDA March estimates.

The first USDA soybeans ratings on June 12 showed soybeans at 66 percent good to excellent versus 74 percent last year. Six percent of the nation's soybeans were rated poor to very poor versus 4 percent last year. Soybean plantings are at 92 percent nationally versus the 5-year average of 87 percent planted and 91 percent planted last year. Soybean emergence is at 77 percent nationally versus the 5-year average of 73 percent planted and 77 percent emerged last year.

Canola

For the week ending June 15, canola July futures in Winnipeg were up down $1.60 Canadian to $513 Canadian per metric ton. The Canadian dollar traded up at 0.7533. This brings the U.S. price to $17.53 per hundredweight. 

* Velva, N.D., $17.69 per hundredweight for June through July 

* Enderlin, N.D., $18.38 for June through July

* Hallock, Minn., $17.97 for June and $18.03 for July

* Fargo, N.D., $18.30 for June $17.85 for July

Barley 

Cash feed barley bids in Minneapolis were at $2.05, while malting barley received no quote. Berthold bid is $2 and CHS Southwest bid is at $2.40 in New Salem, N.D.

Durum 

Cash bids for milling quality durum are $5.85 in Berthold, N.D., and at $6.25 in Dickinson, N.D. 

Sunflower

Cash sunflower bids in Fargo were at $15.45 for June and $15.30 for July. 

For the week ending June 15, soybean oil was 45 cents higher at $32.74 on the July contract.

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