Thin holiday trade
Weekly export inspections came in at 585,637 metric tons with trade expectations of 250,000 to 450,000 metric tons. This was the second week in a row of numbers at the high end of expectations, which gave the wheat market underlying support. The U.S. posted the lowest offers for an Iraq wheat tender Dec. 19 at $283.73 per metric ton. The U.S. Dollar was softer on the week, trading from $93.50 levels to $92.70 levels, which also helped support prices this week. Eastern mills are bidding 20 over for soft red milling wheat, a sign that the cash market is improving.
Weekly export sales were 833,200 metric tons with trade expectations of 300,000 to 600,000 metric tons. This was a marketing year high for export sales. This puts total marketing year sales at 693.4 million bushels, 7 percent below the previous marketing year. Weekly shipments of 21.2 million bushels put the marketing year total at 474.5 million bushels, 7 percent below the previous year. Russian ports are enjoying mild winter temperatures, which is helping expand Black Sea Region overall export capacity for the 2017-18 marketing year.
From a purely technical standpoint, all three wheat contracts rebounded from contract lows and moved higher over the course of the last seven sessions to their 20-day moving averages in Dec. 20 trade. If contracts can manage to trade above these levels, we would likely see short covering and a higher move to the 50 day moving averages.
There was a report stating that Saudi Arabia has halted wheat plantings in country and is turning to Russia to meet its supply needs. The Saudi-Russian Business Council is looking to increase trade agreements in agriculture significantly in the next five years. This would further support quotes earlier from Russian ag officials about significant improvements and investments to grain handling infrastructure including railways.
Informa Economics released acreage estimates for 2018. They are estimating U.S. winter wheat acres at 31.1 million acres. This is a 5 percent decline from 32.7 million acres in 2017. This would be the lowest planted acreage since 1909.
The latest U.S. Drought Monitor shows abnormally dry, D1 moderate drought and D2 severe drought for a good portion of the Southern Plains. Western South Dakota, northeastern Montana and central Arkansas are listed as D3 extreme drought. Although the market usually doesn't get too excited about these conditions over the winter months, it helps limit selling. Weather forecasts are calling for much colder temperatures for the Southern Plains in the next two weeks, which should be supportive.
Corn futures traded in a very narrow range this week and continue to lull around their contract lows. There isn't much bullish news to get this market moving in the right direction at the moment. Expect prices to remain stagnant through the end of the year, as volume will remain light as we get into the holidays. For the week ending Dec. 20, March and May corn were both down 0.5 cents.
South American rains continue to pressure these markets, but strong ethanol production is giving this market underlying support. Corn is searching for a bottom, but will need help with improved exports and ethanol production needs to stay strong. There is a full-scale attack against the ethanol complex coming from many in the oil states, with opponents going after renewable identification number prices first. Oil sharks smell blood in the water, and it will be a battle to keep corn prices supported by ethanol usage if ethanol proponents start giving up ground.
Corn usage for ethanol was the third highest on record, only trailing the past two weeks. Ethanol production for the week ending Dec 15 averaged 1.077 million barrels per day. Weekly ethanol production decreased 1.1 percent from last week and is up 3.96 percent from last year. Corn use for ethanol was 112.1 million bushels, ahead of the 104.647 million bushels pace needed for U.S. Department of Agriculture's estimates of 5.525 billion bushels. Ethanol stocks are at 22.32 million barrels, down 0.24 percent from last week and up 17.1 percent versus last year.
Dalian (Chinese) corn futures have continued to climb higher and have reached new contract highs. That corn market is up over 20 percent this year. If anything, we should expect our dismal pace of corn exports to pick up as these corn futures relationships at these levels. With U.S. ethanol futures trading around 10-year lows, we have seen an over 30-percent increase in ethanol exports this year with China as one of the primary buyers.
Rains in South America are giving bears reason to trade another large crop again this year. Recent moisture in Argentina has allow farmers to start planting again in areas that needed a drink, and now most of the areas that were delayed are planting into some moisture.
Soybeans closed lower 10 times out of the last 11 days and continue to search for support. Moisture in South America has funds giving up on most of their net long position, and likely will show a net short in the next Commodity Futures Trading Commission report. Soybeans are at three-month lows, and soybean meal is testing its one-month low. Soybean meal is drifting towards heavy support at $312, which is only around $4 away.
Informa is estimating 2018 U.S. planted soybean acres at 91.4 million acres versus 90.2 million last year. This is 1.7 million acres more than their prior estimate, partly due to less winter wheat acres. Brazil's crop roundup puts soybean production at 108-108.5 million metric tons versus USDA's forecast of 108 million metric tons. Argentina's crop roundup puts soybean production at 53 million metric tons versus USDA's forecast of 57 million metric tons.
As of the Dec. 20 close, January 2017 soybeans were down 13.25 cents and March soybeans were down 13.5 cents. January soybeans broke through $9.67 support on the daily charts. $9.475 is next support which is getting tested this week. This support was the low the day of the September World Agricultural Supply and Demand Estimates report. Resistance is the recent high of $10.14.
Weekly export sales were at 64.8 million bushels, the majority for the 2017-18 marketing year. This puts marketing year sales at 1.453 billion bushels, 13 percent less than the previous marketing year.
For the week ending Dec. 20, January canola futures in Winnipeg traded 0.20 lower at $494.80 Canadian per metric ton. The Canadian dollar traded .0029 higher to .7795. This brings the U.S. price to $17.50 per hundredweight.
• Velva, N.D., $17.06 per hundredweight, January at $17.30.
• Enderlin, N.D., $17.80 per hundredweight, January at $17.80.
• Hallock, Minn., $17.23 per hundredweight, January at $17.33.
• Fargo, N.D., $17.95 per hundredweight, January at $17.90.
Cash feed barley bids in Minneapolis were at $2.65, while malting barley received no quote. The Berthold, N.D., bid is $2.25 and at 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.
Cash sunflower bids in Fargo were at $17.65, January at $17.60. For the week ending Dec. 20, soybean oil was 25 cents lower at $32.96 on the January contract.