Markets holding support levels
The wheat market started out the week by backing off the $6.20 Minneapolis and $4.42 Chicago levels after short covering gains Oct. 13. Contracts closed lower after reaching these levels during Oct. 16 trade. From there the market drifted lower reaching critical support levels of $4.28 Chicago and $6.07 Minneapolis. The good thing was they held and pushed slightly higher late week.
U.S. wheat exports have been dismal as of late, but it does appear they could pick up. Most experts agree that Russian export capacity is maxed out, and they will soon encounter the problem of a majority of their ports freezing up. Australian export capacity will be down due to a lower than normal crop, and Argentina has experienced high moisture on wheat acres which could lead to quality issues. Egypt purchased 230,000 metric tons of wheat from Russia on Oct. 19. Algeria purchased 600,000 metric tons of wheat Oct. 17 for $210 to $212.50. France was the likely the major supplier.
Weekly export sales totaled 22.6 million bushels, all for the 2017-18 marketing year. This puts total marketing year sales at 543.9 million bushels, 4 percent below the previous marketing year. Weekly shipments of 11.6 million bushels put the marketing year total at 368.1 million bushels, 5 percent below the previous year.
For the week ending Oct. 19, December contracts for Minneapolis wheat were up 0.75 cents at $6.1575, down 6.75 cents at $4.3275 for Chicago wheat, and down 7.0 cents at $4.2925 for Kansas City wheat.
It appears a current trading range of $3.42 to $3.57 has developed going into harvest. Option premium has declined from 17 percent to 12 percent in the past week, which signals we may be in this range for quite some time just as we were for over four months last winter. The bigger question is which way will the market break to get out of this range? The answer will likely come from South American weather and/or any political announcements regarding North American Free Trade Agreement or the Renewable Fuels Standard.
I'm more in the camp of South American weather determining the answer. Currently six-to-10-day forecasts are calling for slightly wetter conditions for Brazil but 11-to-15-day forecasts are calling for slightly drier conditions. Argentine corn plantings are slightly behind but in line with the average. Corn planted acreage is estimated to increase this year.
On the NAFTA front, it seems that more articles are pointing to the three nations agreeing on modernization points of the agreement but that's about it. An article from Bloomberg stated that the U.S. has put forth proposals on auto rules, a sunset clause, government procurement and gutting dispute panels that Mexico and Canada view as "core to the pact." A fifth round of talks is slated for the first week of November in Mexico City. If Pres. Donald Trump walks away, as he has threatened to do, Canada can still fall back on its bilateral trade agreements with the U.S. A Heritage Foundation spokesman was quoted as saying that Trump is "more bark than bite" regarding trade. But if Trump is trying to get four major reforms out of it and he ends up with two or three with the art of the deal — perhaps that's what he's after?
Ethanol production for the week ending Oct. 13 averaged 1.019 million barrels per day. This is up 5.38 percent versus last week and up 2.10 percent versus last year. Total ethanol production for the week was 7.133 million barrels. Stocks as of Oct. 13 were 21.48 million barrels. This is down 0.2 percent versus last week and up 12.8 percent versus last year. Corn used in last week's production is estimated at 104.75 million bushels, bringing cumulative yearly usage to 733.16 million bushels.
Weekly export sales of corn totaled 50 million bushels. This puts total marketing year sales at 587.7 million bushels, 34 percent less than last year. Weekly shipments of 13.4 million bushels put total marketing year shipments at 158.9 million bushels, 46 percent less than the previous year.
It was a down week for soybeans as improving weather forecasts in both the U.S. and South America are keeping the bulls at bay. After weekend rains, an open harvest forecast in the U.S. is helping farmers catch up from the slow start. As of Oct 16, U.S. soybeans were 50 percent harvested versus the five-year average of 60 percent and 59 percent last year. This number should vastly improve on the Oct. 23 crop progress report. Yields have been mixed bag but not disappointing overall.
Soybeans broke through the pre-August report highs of $9.88 November futures and is now sitting just above that number. New November support is $9.88 and then $9.58. For the week ending Oct. 19, November 2017 soybeans were down 13.75 cents and January soybeans were down 13.25 cents.
South American weather may be more important for prices than the U.S. harvest numbers. The direction of the futures will be dependent on how much rain and how widespread the rains are in central Brazil. We already know we are going to have plenty of soybeans in the U.S. this year. The question is will South America get another record crop and increase soybean acres this growing season?
The monthly National Oilseed Processors Association September crush number was slightly less than expected while NOPA September soybean oil stocks were also slightly lower than expected. NOPA reported its members crushed 136.4 million bushels of soybeans in September, slightly less than pre-report estimates of 138.1 million. Crush was 4.7 percent above last year's September crush of 130.2 million bushels and was the highest September crush since 2007.
The weekly export sales report on Oct. 20 showed continued interest in U.S. soybeans. U.S. Gulf prices are still 20 cents cheaper than Brazil's port bids.
For the week ending Oct. 19, November canola futures in Winnipeg were up $2.20 Canadian to $501.20 Canadian per metric ton. The Canadian dollar is trading at .8009. This brings the U.S. price to $18.14 per hundredweight.
• Velva, N.D., $17.76 per hundredweight, December at $18.14.
• Enderlin, N.D., $18.16 per hundredweight, November at $18.38.
• Hallock, Minn., $17.67 per hundredweight, November at $17.77.
• Fargo, N.D., $18.15 per hundredweight, December at $18.40.
As harvest wraps up across much of Canada, we are starting to see a seasonal slowdown in farmer selling. The remaining area that still needs to be harvested is in Alberta, where wet weather has delayed harvest. Weather forecasts are opening up and harvest should get back on track.
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 $6.75 in Berthold and at $6.75 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $16.95. December was $17. For the week ending Oct. 19, soybean oil was up 12 cents to $33.81 on the December contract.