Export news affects markets
There was a follow up report regarding the Russia story from Nov. 21 where weather trackers reported radiation levels nearly 1,000 times the normal level near the Ural Mountain region of Russia. There is speculation that a nuclear event may have occurred there this fall. Mid-week, a wire report stated that France had detected radiation levels in mushrooms that were imported from Russia. The market didn't react to this news in the fashion it would react to a Kansas spring freeze event. If even the possibility of Russian exports getting curtailed was in the news, we would expect some kind of upside movement.
SovEcon estimates the Russian wheat crop for 2018 to be 76.7 million metric tons, slightly lower than 83.9 million metric tons this year. Agriculture Minister Alexander Tkachev was quoted as saying that the expansion of grain export capacity at Russian ports will boost the country's grain shipments by 30 million metric tons annually to 2022. This compares to an estimated 45 million metric tons total for 2017-18. So essentially, they are planning to double their annual export capacity.
A report from Reuters stated that India is expected to have higher production of wheat and pulses in 2018. This is primarily due to the government's guaranteed purchase prices and improved rainfall which will entice more planting. This will likely decrease the need for imported wheat in 2018-19.
Winter wheat ratings declined two percentage points to 50 percent in the good to excellent category from last week. Poor to very poor ratings increased 1 percent to 12 percent from last week. Winter wheat emergence is right at the 5-year average of 92 percent. The U.S. Department of Agriculture released its 2018-19 estimates for wheat plantings. All U.S. wheat seeded area is estimated at 45 million acres with estimated production at 1.815 billion bushels.
Weekly export sales were bearish totaling 6.9 million bushels, with 6.8 million bushels for the 2017-18 marketing year. This puts total marketing year sales at 630.7 million bushels, 9 percent below the previous marketing year. Weekly shipments of 12.4 million bushels put the marketing year total at 427.7 million bushels, 7 percent below the previous year.
For the week ending Nov. 30, December contracts for Minneapolis wheat were down 22.25 cents at $6.0125, down 6.5 cents at $4.0925 for Chicago wheat, and unchanged at $4.145 for Kansas City wheat.
Corn futures turned around midweek as they try to establish some upside after lingering down near contract lows. December corn dipped back down to contract lows of $3.36 and March corn got within a half penny of their contract lows of $3.4875 before buying came back into the market. There is not a lot of fundamental news to trade currently, and there may not be much of a push in either direction ahead of the Dec. 12 USDA report. For the week ending Nov. 30, December was down 0.5 cents and March was up 0.5 cents.
Weather concerns are going to have to pop up in South America in order for the funds to get nervous and finally take their profits. Southern Brazil and western Argentina are expected to be on the wet side the next two weeks, with the rest of Brazil and Argentina drying out.
Fresh news has been nonexistent for row crops, and this continues to keep the funds near record net short. Commodity Futures Trading Commission data on Nov. 21 showed the funds marginally decreasing their net short positions last week, moving from net short 231,000 contracts to net short 210,000.
The Environmental Protection Agency announced their final 2018 renewable volume obligations for the renewable fuel standard on Nov. 30. They are keeping the corn ethanol requirements at the 2017 levels of 15 billion gallons. This is a bit disappointing as the analysts were hoping they were going to rise. But it is a better outlook than they had this spring when the initial proposed RVOs showed lower volume mandates.
Uncertainty around the North American Free Trade Agreement has been putting pressure on the corn and wheat market. Exports are off to a slow start and the last thing the grain markets need are another reason for countries not to take our corn. Weekly export numbers continue to disappoint, and the concern among traders is that the USDA will have to lower their demand expectations in future reports.
Weekly export sales of corn showed a total of 23.6 million bushels for the 2017-18 marketing year. This puts the total for the marketing year at 867 million bushels, 27 percent less than last year at this time.
Soybeans had a down week as export sales continue to lag behind last year and the EPA mandates for biodiesel were disappointing. Soybean prices continue to get pulled in two directions as soy meal is trending up, but soy oil has been under pressure the last three weeks. The USDA announced some new sales to China and an unknown destination on their daily wires this week. This kept underlying support in this market. CFTC data on Nov. 21 showed the funds marginally shrinking their net long positions last week, moving from net long 23,000 contracts to 20,000.
It is wait-and-see mode on South American weather, and right now there are not enough problems across that continent to get the trade too excited to push prices higher. A weather premium remains in the soybean market as South America gets into their summer months. Soybeans were not able to hold after breaking through the $10 mark for the first time since the November WASDE report. Export demand needs to pick up to start another round of buying. For the week ending Nov. 30, January 2018 soybeans were down 7.5 cents and March soybeans were down 7 cents., but soybeans were gaining back most of these losses the morning of Dec. 1.
Makers of biodiesel have more capacity to expand and were pushing for the EPA to hike the quota higher than the proposed requirement of 2.1 billion gallons outlined in July. EPA administrator Scott Pruitt pledged to set final targets at levels "equal to or greater than the proposed amounts." In the end they ended up keeping biodiesel requirements the same as last year, which is a negative in the trade's eyes.
The USDA came out with their early baseline projections for next year. USDA's baseline projections show 91 million acres of soybeans will be planted in 2018, larger than the 2017 record of 90.2 million acres. The baseline yield is 48.4 bushels per acre, lower that the current estimate of 49.5 for 2017-18. USDA's baseline report also shows next year's 2018-19 soybean carryout below 400 million bushels at 376 million bushels.
Export sales were disappointing at 34.6 million bushels for the 2017-18 marketing year. This puts marketing year sales at 1.264 billion bushels, 18 percent less than the previous marketing year.
For the week ending Nov. 30, January canola futures in Winnipeg traded .10 higher at $509.60 Canadian per metric ton. The Canadian dollar traded .0112 lower to .7755. This brings the U.S. price to $17.93 per hundredweight.
• Velva, N.D., $17.32 per hundredweight, December at $17.43.
• Enderlin, N.D., $18.02 per hundredweight, December at $18.02.
• Hallock, Minn., $17.38 per hundredweight, December at $17.68.
• Fargo, N.D., $18.15 per hundredweight, December at $18.05.
Cash feed barley bids in Minneapolis were at $2.40, while malting barley received no quote. The 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 at $6.25 in Dickinson, N.D.
Cash sunflower bids in Fargo, N.D., were at $17.85, December at $17.60. For the week ending Nov. 30, soybean oil was 19 cents lower at $33.75 on the December contract.