Lack of rains giving markets life
The wheat market experienced very choppy trade this week. We started out the week with good gains on continued dry forecasts for the southern Plains. Technically, we had a reversal lower in both the Chicago and Kansas City markets Feb. 13. Both the six to ten and eight to 14-day forecasts were calling for rainfall through much of Oklahoma and Texas for the last few weeks of February that brought selling pressure.
July Kansas City traded to $5.15 twice in the past week but experienced a lack of buying at those levels. There is a trade gap down at the $4.84 level that could be filled if rains are decent in the next two weeks. Current support levels are $6.00 for March Minneapolis, $4.5375 for March Chicago and $4.915 for July Kansas City.
A couple of reports from Bloomberg pointed out a few key things for the week market. The first report stated that Canadian farmers are backing off of dry pea and lentil plantings and are looking to plant more wheat and canola in 2018. The other report talked about the Black Sea region cutting into Australia's export share in the world market. Australia has went from around 60 percent market share into southeast Asia in 2011-12 down to less than 40 percent in 2016-17. The report went on to state that the U.S., Canada and Argentina could lose market share in upcoming years as the Black Sea region now accounts for approximately 25 percent of world wheat exports.
All wheat contracts have a 12.75 to 14.75 cent carry from March to May and similar deferred carries which is not really that bullish. The market knows that we are sitting on plenty of wheat, which I think is part of the reason Minneapolis has failed to move up much with the recent rally in Chicago and Kansas City. If farmers were selling spring wheat last year, they likely were selling their lower quality protein first. I think what's left in the bin is pretty high quality or at least higher quality than a normal year. I think the protein premiums will narrow going into next fall assuming both the Minneapolis and Kansas City markets get a normal to above normal crop.
Weekly export sales totaled 421,900 metric tons with trade expectations of 200,000 to 450,000 metric tons. Cumulative export sales for the year are running 12 percent behind last year at 775.9 million bushels. Shipments of 595.9 million bushels are running 4 percent below last year.
For the week ending Feb. 15, March contracts for Minneapolis wheat were up 1.5 cents at $6.05, up 12.75 cents at $4.6175 for Chicago wheat, and up 12.5 cents at $4.78 for Kansas City wheat.
Brazil's safrina corn plantings are 19 percent versus 32 percent last year. Matto Grosso is 37 percent planted versus 54 percent last year, Panara is 6 percent planted versus 23 percent last year and MGDS is 7 percent planted versus 21 percent last year. Wet weather continues to add to delayed planting pace. Argentina remains dry with forecasts calling for continued dryness for the week ahead.
Resistance on March is currently $3.6775 with support at $3.62. We have traded above the $3.6775 three times in the past week, but have failed to close above this level. It appears the market will continue to test this level trying to balance hefty U.S. stocks and the unfolding weather challenges in South America. If we can punch through the $3.68 level, $3.80 levels on the weekly charts would be the next resistance levels. For the week ending Feb. 15, March was up 5.75 cents to $3.6775 and May was up 5.75 cents to $3.755.
April crude oil retreated to $57.90 before recovering this week to $61.40 levels. It appears the $58.00 level is forming a base level of support and $66.00 levels are resistance. Current pump price spreads show a 90 cent discount on E-85 to E-10 in the Fargo, N.D., market. The market has been signaling more consumption of alcohol-based fuels over the past few months and this will likely continue into spring if crude contracts remain above $58.
Weekly ethanol production averaged 1.016 million barrels per day. This is down 3.88 percent versus last week and down 2.31 percent versus last year. Total ethanol production for the week was 7.112 million barrels. Stocks as of Feb. 9 were 22.885 million barrels. This is down 2.57 percent versus last week and up 1.71 percent versus last year. Corn used in last week's production is estimated at 105.66 million bushels bringing cumulative corn used for ethanol to 2.61 billion bushels.
Export sales were robust for the sixth straight week at 2,072,000 metric tons. This was well above expectations of 1,000,000 to 1,500,000 metric tons.
Soybeans continued their impressive streak higher to close at highs last seen the beginning of December. Soybean meal is at contract highs and to levels last seen in July 2016 as the drought in Argentina worsens. The U.S. dollar continues to provide support also as it sneaks back to contract lows. For the week ending Feb. 14, March soybeans were up 34.25 cents, July 2017 soybeans were up 34 cents, and November soybeans were up 20 cents.
The February U.S. Department of Agriculture's report last week was considered bearish, but the market has had a bullish reaction to it. U.S. stocks were raised due 60 million bushels to poor exports. U.S. ending stocks came in near the upper end of the average estimates and got raised 60 million bushels to 530 million bushels. This compares to U.S. ending stocks of 303 million bushels for the same time last year, yet soybeans are at the same price as a year ago.
Weather forecasts for Argentina remain dry and hot for the next week, with a few better chances for precipitation popping up here and there. In many parts of Argentina, the rains are half or less than last year. The exchange is now estimating 50 million metric tons of production, with many people saying it could be less if they go another week with hot temps and without rain. Brazil is getting consistent rainfalls, but harvest delays have been limited lately.
The weekly Brazil crop round up puts their production at 112-113 million metric tons versus USDA forecasts of 112 million metric tons. The weekly Argentine crop roundup puts their soybean crop at 48-49 million metric tons versus USDA forecasts for 54 million metric tons.
Soybeans broke through resistance for March soybeans that was the recent highs of $10.0475, and that is now support. The Dec. 5 highs of $10.27 in next major resistance. $9.565 and then $9.445 are technical chart support marks.
The crush report from the National Oilseed Processors Association came out Feb. 15 and the numbers were disappointing versus trade expectations. The January NOPA crush number was lower than expected. The January NOPA soybean oil stocks were higher than expected.
For the week ending Feb 14, March canola futures in Winnipeg were up $5.90 Canadian at $503.8 per metric ton. The Canadian dollar was up at .7987. This brings the U.S. price to $18.16 per hundredweight.
• Velva, N.D., $18.01 per hundredweight, March at $18.19.
• Enderlin, N.D., $18.66 per hundredweight, March at $18.66.
• Hallock, Minn., $18.07 per hundredweight, March at $18.25.
• Fargo, N.D., $18.70 per hundredweight, March at $18.65.
Cash feed barley bids in Minneapolis were at $2.85, while malting barley received no quote.
The Berthold, N.D., bid is $2.45 and CHS Southwest New Salem, N.D., bids were at $2.50.
Cash bids for milling quality durum are $6 in Berthold and at $5.75 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.35, March at $17.50. For the week ending Feb 14, soybean oil was down 16 cents at $31.80 on the March contract.