U.S. dollar pressuring grains
The wheat market started out the week with 10 cent gains on Oct. 23 on short covering. Critical support levels of $4.25 Chicago and $6.09 Minneapolis held before the buying ensued. Both contracts had follow through buying through mid week, but stalled out when Chicago failed to close above the 50-day moving average of $4.4075.
The U.S. dollar had a $1 move higher Oct. 26 to the $94.50 level and follow through Oct. 27 to the $95 level, which put further pressure on the wheat complex. This is the last thing the U.S. wheat markets need now, as our wheat is less competitive for export with a rising U.S. dollar. If you strictly look at charts, $91 levels appear to have solid support.
The International Grains Council added another 1 million metric tons to world supply. IGC estimates 2017-18 world production at 748.5 million metric tons, up from 747.6 million metric tons. Australia expects lower exports this year due to their below average crop.
On the weather front, Argentine and Brazil wheat growing areas are struggling with wet conditions that likely will erode quality. Europe and the former Soviet Union wheat regions have been receiving beneficial rains, although northeast Europe is unfavorably wet.
Winter wheat plantings remain behind the five-year average pace of 80 percent. Currently 75 percent of the crop is planted according to the United States Department of Agriculture's weekly crop progress report.
Weekly export sales were bearish, totaling 14.4 million bushels, with 13.2 million bushels for the 2017-18 marketing year. This puts total marketing year sales at 557.1 million bushels, 6 percent below the previous marketing year. Weekly shipments of 4.4 million bushels put the marketing year total at 372.5 million bushels, 6 percent below the previous year.
For the week ending Oct. 26, December contracts for Minneapolis wheat were up 9.25 cents at $6.205, up 5.75 cents at $4.3175 for Chicago wheat, and up 5.5 cents at $4.2825 for Kansas City wheat.
Corn had a good move upward in Oct. 23 trade with follow through buying Oct. 24. The December contract traded to $3.5525 but failed to close above the 50-day moving average of $3.535. Harvest pressure kept a lid on the high end of the range. Technically this was not a good sign, but if we can hold above $3.485 for the week it could confirm that a double bottom of $3.42 during the Oct. 10 report and $3.43 on Oct. 23 is in. For the week ending Oct. 27, December was up 6 cents at $3.505 and March was up 6 cents at $3.645. Support is $3.475 with resistance at $3.545.
Weekly export sales were bearish at 54.5 million bushels. For the market to only be down half a cent on Oct. 26 trade with negative exports, it feels like we do have decent underlying support particularly with harvest. Minnesota, Wisconsin and the Dakotas are all under 20 percent harvested, well behind the normal pace of 60 percent. Eight- to 14-day forecasts are calling for colder and wetter conditions, which will make completing the final 80 percent a challenge. Last week's weather dried this corn down significantly, so some of the talk of leaving corn stand until early December was going away. However, if the moisture/snowfall combination is too great we may be harvesting in December regardless.
The biofuels industry appeared to have a big win last week, when seven farm state senators received a letter from Environmental Protection Agency administrator Scott Pruitt stating that the EPA would meet volumetric targets at or above levels prescribed for 2018 in the Renewable Fuels Standard. The letter also stated that they would not change the current point of obligation for Renewable Identification Numbers nor would the EPA count imported ethanol against domestically produced ethanol for RIN credits.
Sen. Chuck Grassley of Iowa and others threatened to hold up EPA nominees if there wasn't some clarification. Now a group of oil state senators is demanding a meeting with President Donald Trump and is holding up the U.S. Department of Agriculture nomination of Bill Northey, an ethanol supporter. Senators from Texas, Wyoming and Oklahoma signed the letter, along with Jeff Flake of Arizona, Pat Toomey of Pennsylvania and Mike Lee of Utah. Unfortunately, the fight over the RFS is far from over. We can expect political announcements determining market direction over the winter months just as much as South American weather making this market far more difficult to trade.
Ethanol production for the week ending Oct. 20 averaged 1.039 million barrels per day. This is up 1.96 percent versus last week and up 4.84 percent versus last year. Total ethanol production for the week was 7.273 million barrels. Stocks as of Oct. 20 were 21.034 million barrels. This is down 2.08 percent versus last week and up 5.6 percent versus last year. Corn used in last week's production is estimated at 106.85 million bushels bringing cumulative yearly usage to 840.01 million bushels
Soybeans were under pressure this week ahead of Oct. 27 November option expiration. There was a large amount of option open interest at the $9.60 area which kept pressure on the soybean market. Chinese Dalian soybean prices are also pressuring soybeans as they traded to their lowest price in 18 months. China's largest soybean harvest in six years is causing concerns that their government might lower prices or suspend state buying. Soybean harvest is wrapping up across the U.S. as farmers now start to focus on getting their corn harvested. For the week ending Oct. 26, November 2017 soybeans were down 7.5 cents and January soybeans were down 6.75 cents at $9.825.
Later planted soybean yields are not yielding as strong as some farmers were expecting after seeing strong yields for the early planted soybeans. Overall yields have been impressive this year, and we are likely going to have a new production record for soybeans in the next USDA report. A large increase in soybean acres is the primary reason for this, as overall yields are not as good as last year's record per-acre yield.
South American weather is currently the primary focus for the soy markets, and the amount of rain they get in central Brazil will determine what direction these markets could be headed.
In the week that ended Oct. 17, funds added to their net long positions to the tune of 37,000 contracts and are now net long 68,000 contracts. Oct. 31 is first notice day for November futures. Long positions are reported after the close on Oct 30.
For the week ending Oct. 26, November canola futures in Winnipeg were up $5.60 Canadian at $507.80 Canadian per metric ton. The Canadian dollar has been trending down to .7782. This brings the U.S. price to $17.93 per hundredweight.
• Velva, N.D., $17.42 per hundredweight, November at. $17.49.
• Enderlin, N.D., $17.98 per hundredweight, November at $18.09.
• Hallock, Minn., $17.40 per hundredweight, November at $17.51.
• Fargo, N.D., $18.10 per hundredweight, November at $17.95.
Canola futures are in an uptrend, but a weakening Canadian dollar is limiting gains for U.S. canola.
Cash feed barley bids in Minneapolis were at $2.10, while malting barley received no quote. Berthold, N.D., bid is $2.25 and CHS Southwest New Salem, N.D., bids were at $2.50.
Cash bids for milling quality durum are $6.25 in Berthold and $6.25 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.20 and December at $17.10. For the week ending Oct. 26, soybean oil was up 35 cents to $34.51 on the December contract.