Weaker U.S. dollar supporting prices
The eastern half of Kansas and Nebraska received a rain/snow mix Jan. 21-22, which put initial pressure on the wheat complex early week. The moisture was not heavy and the Jan. 25 U.S. Drought Monitor showed an expansion D3 extreme drought in southwestern Kansas, western Oklahoma and northern Texas. This provided a firm undertone to the market late week.
The U.S. dollar continued its lower trend, trading to $88.25 on the March contract. The Euro traded sharply higher to 125 levels, a three-year high versus the U.S. dollar. European wheat is currently uncompetitive in the world export market. The ruble regained its uptrend from early December in this week's trade. Currency fluctuations were the biggest market mover this week providing a firm undertone to the wheat complex mid week.
When currencies start a trend they seem to keep the trend for long time. Hopefully, the dollar can continue to trend lower to help U.S. export pace. Russian prices are increasing with the value of the ruble increasing. Export offers out of the Black Sea region are at a three-month high, around $193 per metric ton.
The U.S. Department of Agriculture ag attache in Australia confirmed USDA estimates of a 21.5 million metric ton crop, down from 30.4 million metric tons in 2016. There were thoughts of potentially lower yields, but late season weather improvements kept that from further declines.
For the week ending Jan. 25, March contracts for Minneapolis wheat were up 2.25 cents at $6.1075, up 11.75 cents at $4.345 for Chicago wheat, and up 7.5 cents at $4.35 for Kansas City wheat.
The corn market has been attempting to crawl upwards, meeting resistance. March futures touched $3.54 level before backing off early week. The next area of resistance was $3.58, the 100-day moving average which was hit in Jan. 25 trade before retreating. The 20- and 50-day moving averages have converged at $3.5175 so there is a lot of technical support there. But it does show the narrative that corn futures remain locked in a very tight trading range. A 17-percent stocks-to-use ratio will likely lead to a mundane and narrow trading range. Remember bottoms take months to form and tops take minutes!
Managed money traders are short over 226,800 contracts as of Jan. 16. In Jan. 24 trade, the U.S. dollar declined under $89 levels which led to short covering. These buybacks were met with significant selling after a 5 cent move, the largest since early December. Open interest is 1.668 million contracts, the highest since late November. For the week ending Jan. 25, March was up 2.75 cents to $3.5525 and May was up 3 cents to $3.6375.
Ethanol production for the week ending Jan. 19 averaged 1.062 million barrels per day. This was up 0.09 percent versus last week and up 1.05 percent versus last year. Total ethanol production for the week was 7.434 million barrels. Stocks as of Jan. 19 were 23.8 million barrels. This is up 4.65 percent versus last week and up 9.54 percent versus last year. Corn used in last week's production is estimated at 110.45 million bushels bringing cumulative corn usage for ethanol to 2.29 billion bushels.
Chinese corn reserves are down 28 percent from record levels as government officials sold 84 million metric tons in calendar year 2017. This was a 36 percent increase from 2016. Bloomberg reported that the Chinese government will take "forceful" measures to speed up the level of "irrational" levels of grain reserves in 2018. Sinograin sold all of the 35,179 metric tons of corn offered on auction late week and reaffirmed they will continue sales of large state grain reserves.
Weekly export sales numbers were delayed with the government shut down and will likely set the tone in Jan. 26 trade. We continue to trend 32 percent behind a year ago and will need these weekly numbers to improve through the course of the spring.
The grain market enjoyed a solid week as the markets stayed firm with the help of the U.S. dollar. Soybean bulls are now enjoying an eight-day winning streak, and all the contract months are back above $10, with the March contract trading back and forth on both sides of $10. For the week ending Jan. 25, March soybeans were up 15 cents. July 2017 soybeans were up 15.25 cents.
The 10-day forecast calling for limited precipitation in Argentina continues to provide support. Argentina forecasts have dried up for the next two weeks, and their most recent forecast is putting more heat in the forecasts. Argentina estimates continue to get lowered for their soybean production by both government and private firms. The Buenos Aires Grains Exchange rates soybean conditions in Argentina at 37 percent good/excellent versus last year's 53 percent.
As of now, Brazil's big crop could still cover many of Argentina's losses, but wet weather in Brazil could give their harvest some issues and cause problems. The weekly Brazil crop is 110-111 million metric tons versus USDA forecasts of 110 million metric tons. The weekly Argentine crop roundup puts their soybean crop at 52 million metric tons versus USDA forecasts for 56 million metric tons.
The U.S. dollar index is now below 89 points and is the lowest it has been since December 2014. This may finally be providing support as the Brazil Real has been increasing. The weak U.S. dollar policy of the current administrator has caused the dollar to plunge. The U.S. dollar has seen an approximately 14 percent decline since President Donald Trump took office in early 2017. Trump is on record as preferring the weakness as it gives exporters an edge on the global trading stage.
Informa Economics cut its 2018 soybean acre forecast 245,000 acres from their December estimates. January estimates are now at 91.197 million acres. The 90.142 million acres planted in 2017 was a record.
Soybeans broke through highest moving average, the 100-day moving average of $9.87. There is a lot of resistance in the March contract around the $10.20 area.
For the week ending Jan. 24, March canola futures in Winnipeg were down $1 Canadian at $495 Canadian per metric ton. The Canadian dollar has been climbing and is now at .8117. This brings the U.S. price to $18.12 per hundredweight.
• Velva, N.D., $18.03 per hundredweight, February at $17.96.
• Enderlin, N.D., $18.62 per hundredweight, February at $18.62.
• Hallock, Minn., $18.09 per hundredweight, February at $18.09.
• Fargo, N.D., $18.55 per hundredweight, February at $18.50.
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 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.60, February at $17.55. For the week ending Jan. 24, soybean oil was up 40 cents at $32.68 on the March contract.