Negative tone prior to report
Kansas City spot basis has been improving recently. Thirteen percent higher protein improved 15 cents on Jan. 9. The recent cold weather has also given the market support over concerns of declining yields and potential winterkill. There is also speculation that winter wheat plantings could be lower than anticipated. All these factors are providing a firm undertone to the wheat complex.
The latest Commodity Futures Trading Commission data showed funds decreased their net short position in the Chicago wheat contracts by 17,557 contracts to -128,178 short for the week ending Jan. 2. Kansas City contracts are currently net short -29,961, a reduction of 5,461.
The average trade estimate on Kansas City winter wheat plantings is 22.327 million acres with the highest guess at 23.1 million acres and the lowest at 21.1 million. This compares to 23.426 million planted acres last year. All winter wheat planted acres, which includes soft red and white wheat, are estimated by trade to be 31.307 million with the high and low between 32 and 30.1 million acres. This would compare to 32.696 last year.
The average trade guess on U.S. ending stocks for 2017-18 on all wheat is 959 million bushels with the range between 855 to 986 million bushels. This compares to 960 million in the December report. World ending stocks for 2017-18 are estimated at 268.26 million metric tons with a range of 265 to 271 million metric tons. U.S. Department of Agriculture's December report estimated 268.42 million metric tons.
Australia's Bureau of Statistics released their estimate of 30.363 million metric tons for the 2016-17 crop. They are pretty notorious for late revisions, and this differs from USDA's 33.5 million metric tons estimate. Keep in mind that this is last year's crop as 2017-18 USDA estimates are 21.5 million metric tons with the challenging growing season that they encountered. So there is some head scratching going on in the trade as to the conflicting numbers from last year.
For the week ending Jan 10, March contracts for Minneapolis wheat were up 7.25 cents at $6.34, up 3.5 cents at $4.3425 for Chicago wheat, and up 3 cents at $4.405 for Kansas City wheat.
Corn futures started the week on a negative tone as SinoGrain, the Chinese state grain entity, announced it will start auctioning its corn stockpiles. This led to a 1.5 percent decline in Dalian (Chinese) corn futures and a 4 cent hit in U.S. corn futures in Jan. 8 trade. Dalian corn futures are at a two-year high due to a lack of quality corn. Their feed mills and processors had been buying corn at a frantic pace ahead of the Chinese New Year.
Corn bounced off the March $3.4675 contract low that it reached in Jan. 8 trade and once prior on Dec. 19. The good thing is open interest is increasing as traders view a contract low as a decent buy. For the week ending Jan. 10, March corn futures were down 2.25 cents at $3.49.
The recent cold snap has caused natural gas prices to increase, which is cutting into U.S. ethanol plant profits. Ethanol production dropped sharply for the second straight week at 996,000 barrels per day. This was down 3.49 percent versus last week and down 5.05 percent versus last year. Total ethanol production for the week was 6.972 million barrels. Stocks as of Jan. 5 were 22.719 million barrels. This was up 0.44 percent versus last week and up 13.54 percent versus last year. Corn usage for last week's production is estimated at 103.52 million bushels bringing cumulative corn usage for ethanol to 2.07 billion bushels.
Crude oil futures gained $3 per barrel this week in its continuing uptrend. This is contributing to the continuing high price spread at the pump between E-85 and E-10.
U.S. ending stocks estimates average 2.431 billion bushels with the high and low of 2.55 billion to 2.263 billion bushels. This compares to USDA's December estimate of 2.437 billion bushels. World ending stocks for the 2017-18 average guess is 203.09 million metric tons with the high and low of 207 to 198.5 million metric tons. This compares to USDA's December estimate of 204.08 million metric tons. South American production estimates are 94.13 million metric tons for Brazil and 41.5 million metric tons for Argentina. The high and low estimates for Argentina are very close, with Brazil showing a wide difference of opinion between 98.5 million metric tons on the high side and 86.7 million metric tons on the low side.
There is concern arising out of dryness in South Africa. Although South Africa production is only around 12.5 million metric tons (similar to Canada), they use 11.7 million metric tons of that internally. Farmers have only planted 70 to 75 percent of their intended acres due to extremely dry conditions and the planting window is closing.
It was a disappointing week for the grain markets. Soybeans were under pressure all week despite the USDA announcing almost daily fresh export sales. Soybeans are in a down trend on concerns of a negative January report. The trade is focused on the slow pace of U.S. exports that will up the pressure on the World Agricultural Supply and Demand Estimate to trim 2017-18 U.S. soy exports. China's soy imports are forecast to fall from 8 million metric tons in January to 6 million metric tons in February. This is down drastically from the record 9.5 million metric tons of China soybean imports in December.
March soybeans dipped below the recent lows of $9.5475 and hit lows last seen the end of August. After slipping through this support, the next leg down could be $9.37 support set in the middle of August. CFTC data on Jan. 2 showed the funds heavy net short for the last three weeks, moving from net short 69,000 contracts to 86,000. For the week ending Jan. 10, March and July soybeans were down 15.75 cents.
Speaking at the American Farm Bureau's annual convention on Jan. 8th, U.S. President Donald Trump told farmers that he supports crop insurance, a change in his proposal from last year when he mentioned he would like to shrink subsidies.
For the week ending Jan. 10, March canola futures in Winnipeg were down $5 Canadian at $493.60 Canadian per metric ton. The Canadian dollar was down .0009 to .8051. This brings the U.S. price to $18.03 per hundredweight.
• Velva, N.D., $17.94 per hundredweight, February at $17.87.
• Enderlin, N.D., $18.52 per hundredweight, February at $18.52.
• Hallock, Minn., $17.84 per hundredweight, February at $17.88.
• Fargo, N.D., $18.60 per hundredweight, February at $18.55.
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 $2.55.
Cash bids for milling quality durum are $6.25 in Berthold and at $6 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.65. December at $17.60. For the week ending Jan. 10, soybean oil was down 31 cents at $33.45 on the March contract.