Wild card is Argentina weather
As we begin the new year, it's always good to reflect on the past year. Late June and early July of 2017 gave us the best pricing opportunities last seen since May of 2014 as Minneapolis futures touched $8.00 levels. It will be interesting to see what kind of opportunities 2018 will give us. Although we have all heard the constant news that the world is awash in wheat, 2017 proved that higher quality protein wheat is more acutely vulnerable to the weather than lower protein that is grown throughout the world. Hopefully, we do not have to wait three more years for decent opportunities.
The two biggest factors in this week's holiday-shortened trade were the cold front gripping the country and the U.S. dollar trading lower. The arctic cold front that is over the northern and central Corn Belt is making its way south. This cold front made enough shorts nervous in Dec. 27 trade that led to the buying back of contracts. Managed money is 184,000 contracts net short in the Chicago and Kansas City markets, which leaves the market vulnerable to short covering waves.
All three wheat contracts closed above their 20 day moving averages in Dec. 27 trade. It's not out of the realm of possibility for the market to attempt the 50 day moving averages which are roughly 8 cents higher. The U.S. dollar traded from the $92.80 to the $92.30 level which helped support wheat contracts in general.
Warmer than normal temperatures in Russia are allowing Russian grain to extend winter market competition longer than normal. Russia sold 180,000 tons of wheat to Egypt on Dec. 27. By now ports that feed into the Black Sea would normally be shutting down for the winter. Forecasts call for warmer than normal temperatures through Jan. 10.
For the week ending Dec. 27, March contracts for Minneapolis wheat were up 9.5 cents at $6.2125, up 3.25 cents at $4.28 for Chicago wheat, and up 3.25 cents at $4.255 for Kansas City wheat.
Corn futures experienced seven positive sessions through Dec. 27 trade. Although they have been small gains — they have been gains. The March corn contract is approaching the 50 day moving average of $3.56. It will be a big test to see if we can get to that number. Recently March has traded $3.46 to $3.605. If $3.56 resistance holds, we would anticipate another test of $3.46. The consensus of most in the trade is that corn futures will remain in the $3.40 to $3.60 range for quite some time.
Farmer selling has been almost non-existent at this point but that has led to basis improvement to try and entice grain flow. Even in looking at some March 2019 locations, there are some basis opportunities that are presenting themselves currently.
Ethanol production for the week ending Dec. 22 averaged 1.09 million barrels per day. This is up 1.21 percent versus last week and up 6.03 percent versus last year. Total ethanol production for the week was 7.63 million barrels. Stocks as of Dec. 22 were 22.031 million barrels. This is down 1.29 percent versus last week and up 17.92 percent versus last year. Corn used in last week's grind was estimated at 113.46 million bushels bringing cumulative corn usage for ethanol to 1.86 billion bushels.
Crude oil futures were sharply higher in Dec. 26 trade touching the $60.00 mark for the first time since June 2015. Ethanol futures on the other hand recently reached a 10 year low at $1.249 per gallon on Dec. 14. U.S. Energy Information Administration data released Dec. 22 showed crude oil stocks declined slightly more than expected at 431.88 million barrels. Gasoline stocks rose to 228.37 million barrels, but this rise was less than expected pointing to better demand than traders expected. The widening price relationship of corn/ethanol futures and crude oil futures is continuing to show wide price spreads for E-85 versus premium grade fuels.
Soybean futures saw double digit gains to start the week as forecasts for Argentina warm up. Brazil's crop is in good shape, but we could continue to see come adverse weather in Argentina. Forecasts for Argentina are hot and dry this next week, with temps reaching triple digits this weekend. Midweek pressure came from soybean meal making new three month lows this week as it broke through $312 support. Even though it did trek back above that mark, if it slips again, soybean meal doesn't have much technical support until it cracks $300.
The soybean complex is looking for news to give it support. The U.S. biodiesel credit will be reinstated for 2018 and retroactively all the way back to Jan 1, 2017. Crude oil is knocking on the door of $60, which could be supportive for row crops. Front month crude oil futures have not breached $60 since June of 2015 until this week for a brief moment. The U.S. dollar is looking like it is going to have its worst year since 2003 as it hovers around 92 points.
China's November imports were up almost 11 percent from last year, but China's exports from the U.S. declined 17 percent. A large increase in Brazilian exports to China is the main reason for this. There was an explosion at one of Argentina's port grain hubs this week that killed one and injured many more. This prompted a 48-hour strike by their workers and could affect their shipments near term.
$9.465 is new support for January soybeans. Resistance is the 200-day moving average of $9.74 and then recent high of $10.15. For the week ending Dec. 27, January 2017 soybeans were up 6 and March soybeans were up 7.25 cents. Follow through selling was still present as the week progressed.
For the week ending Dec. 27, January Canola futures in Winnipeg were down $6.7 Canadian at $489.5 metric tons Canadian. The Canadian dollar was up to .7916. This brings the U.S. price to $17.58 per hundredweight.
• Velva, N.D., $17.30 per hundredweight, January at $17.37.
• Enderlin, N.D., $17.88 per hundredweight, January at $17.88.
• Hallock, Minn., $17.29 per hundredweight, January at $17.40.
• Fargo, N.D., $18.15 per hundredweight, January at $18.15.
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 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 were at $17.65 and December at $17.60. For the week ending Dec. 27, soybean oil was up 26 cents at $33.07 on the January contract.