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Surprises in Friday's USDA report

Wheat

The wheat market had good gains early week with ongoing crop concerns in Australia, Russia and the Ukraine. The Euro traded to a one-month low versus the U.S. dollar which supported European Union wheat futures and in turn U.S. wheat futures. Australian wheat futures also rallied to $286 U.S. December Chicago peaked at $4.62 which would be current resistance. Support is $4.45.

The mood was tempered late week as Australian wheat futures declined to $285 U.S. on forecasts to receive much needed rains in the growing regions of New South Wales and Queensland. Australian winter rainfall is the lowest since 2002. Also tempering the mood was a report that Russian winter wheat plantings are above last year's 10.6 million hectares, at 11.2 million hectares.

A lack of buying interest also came from poor weekly export sales numbers Sept. 28. The average cash price across the U.S. Department of Agriculture's eight select terminal is up 19.7 percent from the same period a year ago and net sales of wheat are down 13.3 percent.

USDA released its quarterly stocks report Sept. 29. All U.S. wheat stocks came in at 2.253 billion bushels, down 11 percent from last year but near analyst expectations. All U.S. wheat production came in at 1.741 billion bushels down 25 percent from last year's production of 2.31 billion bushels. Spring wheat production was estimated at 416 million bushels, which came in at the high end of expectations, but remains a 22 percent decrease from last year, making it the smallest spring wheat crop since the 388 million bushel crop of 2002.

Other spring wheat estimates ranged from 338 million bushels to 421 million bushels versus USDA's August number of 402 million bushels. Durum production was pegged at 55 million bushels, down 47 percent from last year.

For the week ending September 28, December contracts for Minneapolis wheat were up 10.25 cents at $6.45, up 5.5 cents at $4.55 for Chicago wheat and up 2.75 cents at $4.53 for Kansas City wheat.

Corn

The U.S. Environmental Protection Agency is requesting comment on a further reduction of the 2018 advanced biofuel volume requirement from the proposed level of 4.24 billion gallons to 3.77 billion gallons, and the 2018 total renewable fuel volume requirement from the proposed 19.24 billion gallons to 18.77 billion gallons. The American Petroleum Institute has argued that ethanol imports into the U.S. should count as total production.

Renewable Fuels Association President Bob Dineen issued a formal statement: "We see no statutory basis whatsoever for attempting to limit biofuel imports through the use of a general waiver. It is also likely that using Renewable Fuels Standard waiver authority in an attempt to limit exports would be perceived as a non-tariff trade barrier, which would run afoul of U.S. obligations under the World Trade Organization rules."

Dineen added that "Congress never intended Renewable Fuel Standard waiver authority to manage trade flows." It is unlikely that cutting these numbers would reduce biodiesel imports as biomass-based and renewable diesel imports are a cheaper source for obligated parties (refineries) because they are subsidized by exporting nations.

USDA released its quarterly stocks report for inventories as of Sept. 1. Corn ending stocks swelled to a 30-year record of 2.295 billion bushels. This was slightly below the pre-report trade expectations of 2.35 billion bushels. On-farm stocks were estimated at 787 million, 25 percent higher than last year. Off-farm stocks were pegged at 1.51 billion bushels, 36 percent higher than last year. June to August disappearance was estimated at 2.93 billion bushels, down from 2.97 billion bushels during the same period last year.

Soybeans

Soybean prices could not find additional support to push higher after they found their way back up to the upper end of their trading range last week. They felt pressure from good early yield reports and an improving forecast for rains to get Brazil's planting season started. Weather forecasts for Argentina are still showing a wetter forecast, and they are already wet. Favorable U.S. harvest weather and no threats of frost were negative for prices.

The focus will turn to yields the next couple weeks leading into the Oct. 12 World Agricultural Supply and Demand Estimates report and South American weather will start to get more important. The Sept. 29 quarterly stock report was bullish for soybeans, as they lowered stocks to 301 million bushels, well below pre-report estimates. Pre-report estimates were for stocks to come in at 339 million bushels versus the September estimates of 345 million bushels. The USDA also revised its 2016 soybean production estimate down 10.6 million bushels to 4.296 billion bushels, and trimmed its previous 2016 soybean yield estimate 0.1 bushels to 52 bushels per acre.

This large drop in stocks was lower than any analyst was guessing, and the market reacted positively to it. For the week ending Sept. 28, November 2017 soybeans were down 24.75 cents. January soybeans were down 24.25 cents.

The favorite phrase around the marketing community is "better than expected yields" for the early harvest. Was everybody expecting worse than average yields for much of the Midwest? There were trouble areas in the "I" states and Dakotas, and that is what dominated the news this summer.

Soybeans looked in tough shape early in the year, but for the most part August was an almost perfect growing month for soybeans. Soybean yields are made in August. There was cool weather early in August that helped stop drought conditions from worsening, and rains started falling just in time to save a lot of yield potential.

The USDA was in the camp of better than average yields because of August weather. There was a lot of variability around the country, and that is why this year's production is going to be so hard to peg. Some farmers are getting yields as good as last year, which is surprising to them, but this year's crop is not as uniform as last year.

Overall yields probably won't be as good as last year, but that was an exceptional year. Could the USDA be high on their September report yield estimates? There is a good possibility of that, but don't be surprised if yields end up better than what farmers "were expecting."

If early harvest is any indication for things to come, the U.S. won't have any shortage of beans again this year. Early frost concerns also provided support, but those concerns are in the past now as we get into October.

Soybeans have been resilient the past couple of years, and this year is no exception. Demand continues to stay strong, and that is getting helped by a weakening dollar and Gulf bids that are cheaper than Brazilian port bids. There is a strong appetite for bean products around the world.

During the week that ended Sept. 19, funds bought back more of their positions and are now net long for the first time since the week of Aug. 8.

Soybeans dipped back below $9.79, which is both chart support and the 200 day-moving average. Soybeans finally broke through this resistance on Friday, but could not find follow through to start the week. The pre-August report highs of $9.88 November futures are last resistance before $10.

November 2017 support is $9.58 and then $9.20 is support before we get to the recent lows of $9.07 we saw on June 23.

Canola

For the week ending Sept. 28, November canola futures in Winnipeg were $4 Canadian lower at $490.80 Canadian per metric ton. The Canadian dollar is trading at .8050. This brings the U.S. price to $17.93 per hundredweight.

• Velva, N.D., $17.14 per hundredweight, October at $17.14.

• Enderlin, N.D., $17.79 per hundredweight, October at $17.79.

• Hallock, Minn., $17.11 per hundredweight, October at $17.36.

• Fargo, N.D., $17.70 per hundredweight, October at $17.75.

Losses in the U.S. soy complex, particularly soyoil, is weighing on this market. Seasonal harvest pressure also remains a bearish influence in the canola market. A cool and wet forecast could delay harvest in parts of western Canada. This could provide some underlying support.

Barley

Cash feed barley bids in Minneapolis were at $2.10, while malting barley received no quote. Berthold bid is $2 and CHS Southwest New Salem, N.D., bids were at $2.50

Durum

Cash bids for milling quality durum are $6.75 in Berthold, N.D., and at $6.75 in Dickinson, N.D.

Sunflower

Cash sunflower bids in Fargo were at $17.10, with October-November at $16.90. For the week ending Sept, 28, soybean oil was down $1.36 at $32.63 on the October contract.

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