New contract lows
Agriculture and Agri-Food Canada cut its all-wheat forecast by 1.1 million metric tons to 27.3 million metric tons, which represents a five-year low. This forecast is ahead of the Aug. 31 Stats Canada official release of Production of Principal Field Crops. The estimate also cut durum production to a five-year low at 5 million metric tons, down 700,000 tons. AAFC also increased its Canadian export forecast of durum by 9 percent, primarily due to the poor northern U.S. crop and cited the poor quality of last year's durum crop as reasons for the expected increase. The report also lowered expected Canadian prices by $10 per ton, primarily from the higher Russian yield estimates and more worldwide competition.
Pro Zerno, a private firm, came out with higher Russian wheat yields, which pressured the market early week. Their estimate is 80 million metric tons versus the U.S. Department of Agriculture's September estimate of 77.5 million metric tons. The Russian news agency TASS estimates Russian wheat production at 81 million metric tons. This is 1.1 million metric tons higher than SovEcon's estimate of 78.9 million metric tons. With the large estimates of Russian/ FSU-12 wheat production, Black Sea Region wheat export prices have dropped to $183 per metric ton, the lowest since early June. The International Grains Council raised their 2017-18 ending wheat stocks by 7 million metric tons to 248 million metric tons due to expected increases in Black Seas Region production.
Technically, the wheat complex is extremely oversold as we have seen sharp declines in the month of August. Minneapolis is down 10.1 percent or 85.5 cents, Chicago is down 13.1 percent or 65.25 cents, and Kansas City is down 13.7 percent or 68.75 cents. Aug. 24 appeared to bring a daily upside reversal. We would expect about a 20-cent recovery short term in the Chicago market to get closer to 100- and 200-day moving averages.
Corn futures traded to new contract lows this week and are quietly losing a few cents every day. For the week ending Aug. 24, September corn was down 10 cents and December corn was down 9.5 cents. The bears are in control, and the Pro Farmer Crop Tour didn't show the bullish yield news that producers were hoping for and needed to see. What they did show is that yields are very variable, but far from a disaster. There were quite a few examples of corn with tip back and poor population counts, but they also showed some decent yields in areas that received timely rains. There was a large range in yields, even on farms 10 mile from each other. The Pro Farmer tour is estimating Illinois, Iowa, Indiana, Nebraska and Ohio to come in less than USDA August estimates. Minnesota and South Dakota are expected to come in higher.
The "I" states are showing a lot of variability, which makes sense if you have been paying attention to the Drought Monitor maps. One day a tour route in Indiana showed a range of 106 to 257 bushels per acre. Minnesota looks like the golden child this year. There are more good fields than not in Minnesota, but the question is if they will make it all the way to maturity. The one thing they all can agree on is that there is a lot of corn that is behind normal and needs a late fall to mature. Much of Minnesota is 300 growing degree units behind last year.
Option expiration on Aug. 25 and first notice for September futures Aug. 31 put pressure on these markets. Prices were also not helped by the fact that most basis fixed and priced later contracts cannot be rolled anymore and will get priced by the end of the month.
In the week that ended Aug. 15, funds liquidated 27,000 net long corn contracts to around 40,000 contracts, down from the 67,000 net long the week prior. Funds will probably be back to net short this week.
Soybeans found support as cool weather is starting to cause concern and soybeans are lagging in development. It will take a month to get some of the soybeans to full maturity in central Minnesota. The Pro Farmer Tour didn't give the market many surprises but did show that this year's crop is all over the board in the Midwest.
For the week ending Aug. 24, September soybeans were up 3.75 cents and November 2017 soybeans were up 8.75 cents.
Even though the crop tour didn't help corn prices, the bean market did find some support with lower than average pod counts. There's a lot of variability out there, with some fields looking uniform with good pod counts and other areas that are showing stress because of lack of moisture earlier this summer and less than ideal planting conditions this spring. Other areas had rains show up just in time for many of the dry areas to avert a disaster. Pod counts only go so far to the actual ending yield, but it is giving farmers and bulls hope that the country is not looking at record yields this year.
There was mixed news on the soybean front this week. The U.S. Commerce Department announced that it was applying sizable duties on biodiesel imports from Argentina and Indonesia that would also be applied to imports over the past 90 days. This could price Argentine biodiesel exports out of the U.S. market. Brazil's government approved taxing ethanol imports for the first time in a move to protect local producers from growing shipments coming from the U.S. There was also mixed news on the export side as the USDA announced a few new crop soybean sales this week, headlined by 10.4 million bushels of new crop, but then they announced that China cancelled 23.6 million bushels (640,970 metric tons) of old crop U.S. soybean sales.
For the week ending Aug. 24, November canola futures in Winnipeg were down $1.70 Canadian at $504.70 Canadian per metric ton. The Canadian dollar traded .0029 higher to .7983. This brings the U.S. price to $18.28 per hundredweight.
• Velva, N.D., $17.72 per hundredweight. New crop at $17.18.
• Enderlin, N.D., $18.27 per hundredweight. New crop at $18.16.
• Hallock, Minn., $17.75 per hundredweight. New crop at $17.75.
• Fargo, N.D., $18.45 per hundredweight. New crop at $18.20.
Stats Canada will release its production of principal field crops report Aug. 31. The average estimates for this year's Canadian crop is 18.1 million metric tons versus 18.4 million metric tons last year. Guesses range from 17.5 million metric tons to 19.5 million metric tons.
Cash feed barley bids in Minneapolis were at $2.10, while malting barley received no quote. Berthold, N.D., bid is $2 and CHS Southwest New Salem, N.D., bids were at $2.50.
Cash bids for milling quality durum are $7.25 in Berthold and at $7.25 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.60. Bids for October-November were at $16.60.
For the week ending Aug. 24, soybean oil was up $1.07 at $34.80 on the September contract.