Uncertain temps for September
Stats Canada released its Production of Principal Field Crops on Aug. 31. Canadian Farmers expect wheat production to decrease in most provinces. Total wheat production is expected at 25.5 million metric tons, down 19.5 percent compared to 2016. This was lower than the average trade estimate of 26.2 million metric tons.
Although harvested area should remain stable at 22 million acres, the drop can be traced to a projected lower average yield of 42.5 bushels per acre, down 20.1 percent from the 53.2 bushels per acre reported in 2016.
The durum number was very friendly at a seven year low of 3.89 million metric tons, about 1 million less than trade expectations. U.S. export prices rallied by as much as $70 a metric ton in the last month to $375- $400 per metric tons Free On Board at Great Lakes ports.
Given expected yields and prices, county average counter-cyclical payments for wheat for the 2016 year appear to be likely. Price Loss Coverage will also payout for the 2016 crop.
For the week ending Aug. 31, September contracts for Minneapolis wheat were down 32 cents at $6.185, up 0.75 cents at $4.1025 for Chicago wheat, and up 4.25 cents at $4.0875 for Kansas City wheat.
The Environmental Protection Agency expanded its fuel waiver to 12 states in response to potential fuel shortages from Hurricane Harvey. This and a lower than expected canola number from Canada which supports soybeans and the oilseed complex gave buyers enough good news to enter the market on Aug. 31.
EPA Administrator Scott Pruitt approved the request from the Renewable Fuels Association to allow a waiver two weeks earlier than Sept. 15. Currently there is a prohibition on E-15 sales unless they are used in Flex Fuel vehicles from June 1 to Sept. 15. Pruitt stated in his letter to those 12 states that the shutdown of nearly a dozen refineries and the extreme weather that is prohibiting fuel barge movement in the Gulf area, along with other refineries operating at reduced capacity, is limiting production and availability of fuels to areas both within and outside the Gulf area.
The waiver allows gasoline blenders to produce a fuel that complies with EPA regulations using any available gasoline blendstock on the market including E-15. Ethanol is priced roughly 20 cents per gallon below gasoline blendstock today with ample supplies. The ethanol industry has argued for some time that E-15 should be treated equally to E-10 and that the summertime waiver for E-10 should also apply to E-15.
Refineries have taken advantage of 10 percent ethanol for the octane value. In the past 87 octane was refined and blended with 10% ethanol as an octane enhancer to get to 89 octane. Since the Renewable Fuel Standard, refineries have been refining 85 octane gasoline and adding 10 percent ethanol to meet the 87 octane fuel requirement for most regions of the country. This has given refiners more profit from producing a lower quality octane gasoline. This has also led to a widening price spread of 87 octane to non-oxygenated 91 premium gasoline and the near disappearance of 89 octane at the retail level.
During the aftermath of Katrina, refineries were refining as low as 83 percent octane adding 10 percent ethanol to get to 85 percent octane and a number of vehicles were experiencing high knock as is more typical in higher elevations where 85 octane is allowed. The oil industry was blaming ethanol for the knock when the beginning gasoline blendstock was far inferior to begin with. It is likely that we will hear similar stories regarding this waiver. They will blame ethanol on a much poorer refined product.
For the week ending Aug. 31, September corn was up 3.5 cents at $3.4225. December corn was up 1.5 cents at $3.5775.
Soybeans started the week under pressure before seeing double digit gains on Aug. 31, which pushed soybeans back close to the post August USDA report highs. In the week that ended Aug. 22, funds added on to their short positions 9,000 additional contracts and are now net short 23,000 contracts. For the week ending Aug. 31, September soybeans were down 2.75 cents and November 2017 soybeans were up 0.75 cents.
Weather concerns are not widespread across the country and are not giving this market much to trade. Weather is expected to cool off in the six-to10-day forecast, but most of the low temps do not push into the low 30s in the northern states, or even the low 40s in the northeastern corn belt. The eight-to-14-day forecast shows a warming pattern off these recent low temps. Illinois and Indiana are still somewhat dry, but the market does not seem overly concerned with this.
The "I" states are still a good rainfall short from finishing off the beans in good condition. Rains are not expected to push far enough north from the Delta to help these "I" states out.
Demand has been very good this past marketing year. The USDA reported daily sales of new crop soybeans almost every day this week, which shows that U.S. soybeans are competitive in the global market.
For the week ending Aug. 31, November canola futures in Winnipeg were up $1.40 Canadian at $499.50 Canadian per metric ton. The Canadian dollar traded back up to .8005. This brings the U.S. price to $18.14 per hundredweight.
• Velva, N.D., $17.41 per hundredweight, October $17.05 per hundredweight
• Enderlin, N.D., August - October $18.03 per hundredweight
• Hallock, Minn., $17.61 per hundredweight, new crop $17.43
• Fargo, N.D., $17.85 per hundredweight, new crop $17.70
Canadian farmers anticipate producing 18.2 million metric tons of canola for 2017, down 7.1 percent from 2016. While acreage is expected to increase to 22.8 million acres, yields are expected to come in lower than expected in Alberta and Saskatchewan. The pre-report average estimates for this year's Canadian crop were 18.1 million metric tons. Guesses ranged from 17.5 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 $6.75 in Berthold and at $7 in Dickinson, N.D.
For the week ending Aug. 31, cash sunflower bids in Fargo were at $17.80. Oct.-Nov. $16.60. Soybean oil was up 14 cents at $34.75 on the September contract.