Resistance levels hold steady
It was a fairly wild open in the wheat complex early week with Kansas City and Chicago up 5 to 6 in the overnights after the three-day weekend. Those gains held mid-session Feb. 20 before turning lower. July Kansas City hit $5.175 and looked poised for a breakout until weather forecasts called for beneficial rains over the eastern third of the hard red winter wheat belt in the next seven days.
The Chicago and Kansas City contracts retreated further in the overnight session Feb. 20-21 before buying interest returned. However, technical chart damage was done with Kansas City closing below its 200-day moving average of $4.715. Open interest also declined 6,000 contracts bringing up the possibility of additional long liquidation. Minneapolis retreated sub $6 on the March contract a couple of times during day sessions this week but managed to keep the closes above $6. Weather models show additional rain forecast through the first week of March for the eastern third of the hard red winter wheat belt.
Feb. 23 is option expiration day. In the Chicago contract, the highest concentration of calls is at the 450 strike and the highest concentration of puts is at the 440 strike. Many times the market seems to move to those areas of higher concentration as options expire.
Informa released some estimates regarding wheat Feb. 16. They expect spring wheat acres to increase to 11.25 million compared to 11.09 million last year. They estimate all U.S. wheat acres at 46.1 million compared to 46 million last year. Informa also reduced winter wheat production to 1.231 billion bushels with a 47.7 bushel per acre yield versus 1.292 billion bushels and and 49.3 bushels per acre last month.
For the week ending Feb. 22 , March contracts for Minneapolis wheat were down 2.5 cents at $6.03, down 6.5 cents at $4.5125 for Chicago wheat, and down 7.75 cents at $4.7075 for Kansas City wheat.
Corn touched $3.70 before backing off in Feb. 20 trade. Mato Grosso, Brazil showed significant planting progress last week and are now estimated to be 46 percent planted versus a 41 percent average. Panara second crop corn plantings are currently 16 percent with a slight increase in production estimates to 12.35 million metric tons. Brazil has been one of the concerns in the corn market with wet weather delaying planting, but it seems to be fading. For the week ending Feb. 22, March was down 0.75 cents to $3.6675 and May was down 0.25 cents to $3.7475.
The other primary concern has been the continued hot and dry weather in Argentina. Over the weekend, rainfall amounts and coverage were less than expected which provided a firm undertone to the market. Temperature forecasts are moderating slightly, but the dryness continues. The Buenos Aires Grain Exchange dropped their corn production estimate to 37 million metric tons from 39 million metric tons previously.
The week also started out well for ethanol supporters as Austin Dillon won the Daytona 500 on Feb. 18. Since 2011, NASCAR has surpassed 11 million competition miles in its race cars on Sunoco Green E-15, proving this to be a very road-worthy fuel. Richard Childress Racing and Mr. Dillon are sponsored by American Ethanol and are proving that E-15 delivers the higher octane and reliability that drivers need on and off the racetrack to meet and exceed their performance needs.
Ethanol production for the week ending Feb. 16 averaged 1.068 million barrels per day. This is up 5.12 percent versus last week and up 3.29 percent versus last year. Stocks as of Feb. 16 were 22.753 million barrels, down 0.58 percent versus last week and up 0.37 percent versus last year. Corn used in last week's production is estimated at 111.12 million bushels bringing cumulative corn usage for ethanol to 2.72 billion bushels.
Weekly petroleum data showed crude oil stocks declining moderately versus expectations for an increase at 420.48 million barrels. Gasoline stocks rose marginally to 249.33 million barrels versus expectations of a slight decline. Distillate stocks declined more than expected at 138.95 million barrels. This data pushed crude oil futures $1 per barrel higher in Feb. 22 trade.
The USDA Ag Outlook Forum estimates U.S. corn plantings for 2018 to be 90 million acres, down from 90.2 million in 2017.
Soybean bulls took back control after the disappointing close on Feb. 19 and early losses in the Feb. 19 overnight. Soybeans went back down to fill Feb. 18 night's gap higher and could give soybeans technical support in the near term. March soybeans had their highest close in seven months (July 20) on Feb. 20's close. Soybean meal continues to lead the way as it saw its highest close since July 2016.
Weather forecasts for Argentina have not changed lately and remain dry and hot for the next two weeks. The Rosario Grain Exchange drastically cut their estimates for Argentina's soybean crop to 46.5 million metric tons versus their last estimate of 52 million metric tons. The U.S. Department of Agriculture was at 54 million metric tons in the February World Agricultural Supply and Demand Estimates report. The weekly Brazil crop roundup puts their production at 113-114 million metric tons versus USDA forecasts of 112 million metric tons. Early yields are tracking 3 to 10 percent above expectations.
Brazil is getting consistent rainfalls, but harvest delays have been limited. Brazil's rains should be watched as they get into their main part of harvest, as delays will hurt their yields. Much of the Argentina weather troubles are built into this market now, so Brazil's harvest gets more important every week. Continuing dry weather in Argentina will continue to provide support and may keep the downside limited in the near term though.
Wet, cool weather during Brazil's early harvest is something new that is starting to sneak into traders' minds. The next couple weeks of harvest weather in Brazil will go a long ways for the direction of soybean prices the rest of the winter months. Brazil's soybean crop keeps getting larger, but the question is if they will get it harvested in good shape. So far it hasn't been a major problem getting soybeans harvested early in their harvest season.
As of Feb. 16, Ag Rural put Brazil's harvest at 17 percent versus 26 percent last year. Two of the main growing areas in Brazil are having different weather patterns. Mato Grosso is at 45 percent harvested versus 30 percent last year. Parana is at 5 percent harvested versus 5 percent last year, but their 10-day forecast drys up before rains are forecast to show back up in the 11-15 day forecasts.
March soybeans broke through resistance which was the Dec. 5 highs of $10.27. There is resistance again on the March contract at $10.446, and $10.504 from last July. There is weekly resistance from $10.38 to $10.80 in a number of areas ($10.38, $10.39, $10.532, $10.546, $10.732, $10.80). So there is plenty of resistance on the soybean charts in the next 45 cents. $10.0475 is technical chart support.
As of the close on Feb. 22, March canola futures in Winnipeg were up $7.60 Canadian at $510.70 per metric ton. The Canadian dollar was down .0030 at .7868. This brings the U.S. price to $18.23 per hundredweight.
• Velva, N.D., $18.03 per hundredweight, March at $18.03.
• Enderlin, N.D., $18.60 per hundredweight, March at $18.60.
• Hallock, Minn., $17.94 per hundredweight, March at $18.09.
• Fargo, N.D., $18.60 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 $17.25, March at $17.25. As of midday on Feb. 22, soybean oil was up 63 cents for the week at $32.02 on the March contract.