Lower ending stocks for row crops
The wheat market was under pressure all week after Chicago and Kansas City contracts reached new highs for the move to levels last seen since late July 2017. Rain forecasts dominated the trade this week. Dry regions of Australia, southern Russia and both U.S. winter and spring wheat belts all showed increased chances of rain in six to 10 day forecasts leading to heavy selling pressure.
The monthly World Agricultural Supply and Demand Estimate (WASDE) report was released May 10. All U.S. wheat ending stocks are estimated to be 1.070 billion bushels for 2017-18 and 955 million bushels for 2018-19. These numbers were higher than pre-report estimates of 1.067 billion and 923 million.
All winter wheat is projected at 1.19 billion bushels, 6 percent less than a year ago. The winter wheat yield is projected at 48.1 bushels per acre, down 2.1 bushels from last year. Hard red winter wheat is projected at 647 million bushels, down 14 percent from last year's crop. Soft red winter wheat is projected at 315 million bushels, up 8 percent from a year ago. White winter wheat is projected at 229 million bushels. Each of these classes was at or slightly above pre-report estimates.
For 2017-18, European Union production is estimated at 151.58 million metric tons, the former Soviet Union 12 at 142.20 million metric tons and Canada at 30.0 million metric tons.
Winter wheat ratings improved 1 percent in the good to excellent category at 34 percent. Fair is at 29 percent and poor to very poor remained at 37 percent. This compares to 53 percent good to excellent last year. Winter wheat headed is at 33 percent compared to 41 percent for the five-year average. Spring wheat is 30 percent planted compared to 51 percent normally. Spring wheat emergence is at 4 percent nationally compared to 22 percent for the five-year average.
After breaking sharply April 5-10, the Russian Ruble has stabilized. However, Black Sea Region wheat futures rose 3.1 percent last week to $205.50 per metric tons due to ongoing concern about crop development as southern Russia has been dry.
Weekly export sales for all wheat totaled 3.1 million bushels with 1.3 million bushels for the 2017-18 marketing year. This puts total marketing year sales at 864.9 million bushels, 16 percent below the previous marketing year. Marketing year shipments total 770.6 million bushels, 13 percent below the previous year.
For the week ending May 10, July contracts for Minneapolis wheat were down 14 cents at $6.09, down 19.75 cents at $5.065 for Chicago wheat, and down 28.75 cents at $5.27 for Kansas City wheat.
The USDA came out with bullish numbers in this month's WASDE report, but corn futures did not show a reaction to the new numbers. U.S. ending stocks came in near trade expectations. U.S. ending stocks for 2018-19 are expected to come in at 1.682 billion bushels versus average pre-report trade estimates of 1.63 billion bushels. Estimates ranged from 1.5 billion bushels to 1.9 billion bushels.
The USDA lowered Brazil's corn production estimate 5 million metric tons to 87 million metric tons (3.4 billion bushels) versus trade estimates of 88.2 million metric tons and USDA's April estimates of 92 million metric tons. CONAB did not lower their corn yield as much as the trade was expecting and estimates 89.2 million metric tons. The USDA kept Argentina's corn crop at 33 million metric tons (1.3 billion bushels) which was slightly above pre-report estimates.
USDA's estimate for 2018-19 world ending stocks were lowered much more than expected. World ending stocks came in at 159.15 million metric tons versus pre-trade estimates of 182 million metric tons. The trade guesses ranged from 150 million metric tons to 192 million metric tons.
President Trump on May 9 announced that he will withdraw the U.S. from the 2015 Iran nuclear deal and restore sanctions. This is bullish news for crude oil, but much of this news may have already been built into the market. France, Germany and the United Kingdom expressed they were not on board with Trump's decision and said they intend to preserve the 2015 agreement. The question is, if it is even possible for them to make the agreement work on their own.
This week the White House announced a decision to allow E15 sales year-round. On the negative side, President Trump has said he wants to allow exported ethanol and other biofuels to count towards the annual volume obligations by the Environmental Protection Agency and Renewable Identification Number credits will be allowed for those exports. The Renewable Fuels Association and National Corn Growers association are against counting RIN credits on exports toward overall renewable volume obligations. This announcement sent D-6 RIN prices 10 to 25 cents lower. Generally, when D-6 RIN prices are higher, there is more incentive for refineries to blend ethanol in gasoline. Nothing has been finalized from these meetings, and it may take a couple of months to iron out the details.
The trade was looking for U.S. corn planting at 30-35 percent complete. Commodity Futures Trading Commission data on May 1 showed the funds really adding to their already strong net long stance, moving from net long 123,000 contracts to net long 186,000 contracts.
Corn prices are still technically in an uptrend. December support is at $4.165. Next support after that is $4.0225 and then support is down at $3.925 - $3.95. New resistance is last week's highs of $4.2275 and then the contract highs of $4.295 seen on July 11,, 2017. For the week ending May 10, July corn was down 4.5 cents and December corn was 1.5 cents for the week.
The USDA came out with bullish numbers in this month's WASDE report. Ending stocks came in well below trade expectations. U.S. ending stocks for 2018-19are expected to come in at 415 million bushels versus average pre-report trade estimates of 535 million bushels. Estimates ranged for 400 million bushels to 700 million bushels.
The USDA raised Brazil's soybean production estimates to 117 million metric tons (4.3 billion bushels) versus trade estimates of 116.6 million metric tons and USDA's March estimates of 115 million metric tons. CONAB raised Brazil's soybean crop 2 million metric tons to 117 million metric tons and did not lower their corn yield as much as the trade was expecting at 89.2 million metric tons. The USDA lowered Argentina's soy crop to 39 million metric tons (1.43 billion bushels) which was close to pre-report estimates and lower than USDA's March forecast of 40 million metric tons.
Average trade estimates for 2018-19 world ending stocks were lowered more than expected. World ending stocks came in at 86.7 million metric tons versus pre-trade estimates of 91.1 million metric tons. The trade guesses ranged from 75.5 million metric tons to 97 million metric tons.
Soybean futures have been chopping around as the trade is trying to digest what news is most important at the moment. Soon the only news that will matter again is U.S. weather, but analysts are mixed on if the past few weeks of favorable weather is bearish or bullish for soybean acres. There are also some policy talks in the works at the White House that could give soybeans direction in the near term. Trade talks with China will continue the week of May 13-20 after the first round of negotiations went nowhere. Exports have been poor all year long, so some positive news out of these meetings is needed to give U.S. exports a boost. Brazil has taken a larger share of China's soybeans purchases as Brazil's currency is at its lowest level since June 2016, and Argentina's currency is at a record low.
Soybean futures closed down at two month lows on May 7 but the May WASDE report is looking to give them new life. November soybean resistance is still the April 2 high of $10.60 and if we break that, it is the January 16 high of $10.80. November support is at $10.10 and then the psychological $10 mark. Soybeans are still technically in a long-term uptrend that started the end of May 2017.
CFTC data on May 1 showed the funds adding net long positions, moving from net long 170,000 contracts to net long 177,000 contracts. For the week ending May 10, July 2017 soybeans were down 15.5 cents and November soybeans were down 6.25 cents.
For the week ending May 10, July canola futures in Winnipeg were up $6.10 Canadian at $533.20 per metric tons. The Canadian dollar was up .0061 to .7840. This brings the U.S. price to $18.96 per hundredweight.
• Velva, N.D., $18.76 per hundredweight, September at $17.56.
• Enderlin, N.D., $19.55 per hundredweight, September at $18.17.
• Hallock, Minn., $18.92 per hundredweight, September at $17.79.
• Fargo, N.D., $19.30 per hundredweight, September at $18.00.
Cash feed barley bids in Minneapolis were at $2.85, while malting barley received no quote. The Berthold, N.D., bid is $2.60 and the CHS Southwest New Salem, N.D., bid is $3.00.
Barley is 42 percent planted compared to the five-year average of 59 percent. Thirteen percent of the crop is emerged compared to a 30 percent average.
Cash bids for milling quality durum are $6.00 in Berthold and at $5.50 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.90, and October at $18.75. For the week ending May 10, soybean oil was up 36 cents at $31.13 on the July contract.