USDA report adds stocks
Early week, the wheat market experienced follow through selling from the Jan. 12 report that expects farmers to plant more winter wheat than was anticipated and confirmed adequate world stocks. The report showed that 32.6 million acres of all winter wheat were planted. This was down 1 percent from last year with trade anticipating a 4.5 percent cut. Hard red winter wheat acres came in at 23.1 million, which was the highest trade estimate. This compares to 23.426 million planted acres last year and an all-winter-wheat total of 32.696 million in 2016-17.
U.S. ending stocks were 989 million bushels, compared to the average trade guess of 962 million bushels. This compares to 960 million in the December report. World ending stocks for 2017-18 are estimated at 268 million metric tons, which was right at the average guess. The U.S. Department of Agriculture's December report estimated 268.42 million metric tons. USDA left Australia and Argentina wheat production unchanged at 21.5 million metric tons and 17.5 million metric tons, respectively.
Kansas City and Chicago contracts saw buying in Jan. 17 trade on two-week forecasts that are calling for very little rain through the Central and Southern Plains. This is leading to thoughts that the U.S. Drought Monitor may continue its recent expansion of D2 severe drought and D3 extreme drought ratings. This, combined with hard red winter wheat acres at 23.1 million, the lowest since USDA started keeping records, is enough to keep the shorts nervous. There also is the continued concern about the recent cold snap having a negative effect on stand counts.
A number of analysts expected Chicago and Kansas City contracts to drift down to their recent lows in the $4.10 area after the bearish acreage number, but for now the dry forecast and the recent cold snap are lending support.
For the week ending Jan. 17, March contracts for Minneapolis wheat were down 1 cent at $6.1175, up 1 cent at $4.215 for Chicago wheat, and up 0.75 cents at $4.27 for Kansas City wheat.
March corn futures started the week at the $3.4625 contract low following the Jan. 12 crop report that put it there. The good news is we held the low with buying interest at that level with Jan. 16 and 17 trade feeling firm. For the week ending Jan. 17, March was up 6.75 cents at $3.53. Crude oil futures traded the $63 to $64 levels this week, continuing their overall chart uptrend. This combined with low corn futures continues to give a wide favorable price spread for E85 consumption.
A report from Reuters stated that Chinese farmers are paying much higher prices for urea and other fertilizers. "Fertilizer supplies in some regions are quite tight and prices have gone up quickly," stated the National Development and Reform Commission. The Chinese government had urged citizens through a public awareness campaign to switch from coal to natural gas heating sources over the past year. They are now urging natural gas producers to ensure feedstock and fuel supplies to fertilizer producers to ensure an adequate supply of fertilizer for farmers going into spring. This was a very interesting report to read, as Chinese corn futures have reached two-year highs recently on lower supplies of good quality corn. It appears the short sightedness of their state planning government is setting them up for further shortfalls in 2018.
Brazil's ag minister said they are considering removing the 20 percent tax on ethanol imports from the United States on shipments over 600 million liters. It appears Brazil will make the change if the U.S. lifts the ban on fresh beef shipments from Brazil that was implemented last year after quality concerns.
There is also rising speculation that Brazil's second crop corn planting will be lower than expected due to heavier rainfall during first crop soybean harvest. South American corn production estimates remained unchanged in the Jan. 12 World Agricultural Supply and Demand Estimates report at 95 million metric tons for Brazil and 42 million metric tons for Argentina. The Rosario Grain Exchange cut Argentinian corn production estimates to 39.9 million metric tons from 41.5 million metric tons.
Recapping the Jan. 12 WASDE report: U.S. corn production was pegged at 14.6 billion bushels with a record yield of 176.6 bushels per acre. Final corn acreage came in at 82.7 million acres, down 5 percent from 2016. U.S. ending stocks were increased 40 million bushels to 2.48 billion bushels compared to USDA's December estimate of 2.437 billion bushels. This increases the stocks to use ratio to 17.1 percent. Feed and residual usage was lowered by 25 million bushels and total domestic use was 15 million bushels lower than a month ago. World ending stocks for 2017-18 came in at 206.6 million metric tons with the average guess of 202.9 million metric tons. This compares to USDA's December estimate of 204.1 million metric tons.
After a 3-day weekend, soybeans kept the momentum going from the Jan. 12 USDA report's bullish U.S. yield surprise and saw some upside follow through from the post-report triple digit gains. Ending stocks came in less than average estimates but still were raised 25 million bushels to 470 million bushels. This was largely due to an aggressive cut of 65 million bushels to the U.S. export number.
Short covering came into the market as the funds were vulnerable after they switched to net short a month ago as South American weather improved. Commodity Futures Trading Commission data showed the funds heavy net short for the past month, moving from net short 86,000 contracts to 93,000 the first week of the new year. Soybeans got more bullish news this week as the National Oilseed Processors Association's December soybean crush was larger than expected and at an all-time record high.
NOPA reported its members crushed 166.4 million bushels of soybeans in December, above average market expectations of 165.4 million bushels, and up from 163.5 million in November. The December 2017 crush bested last year's December crush of 160.2 million and was better than the previous record of 165.4 million bushels set in December 2013.
December NOPA soy oil stocks were also sharply higher than expected though. Soybean meal is back up to one-month highs after this news came out.
South American weather still leans negative for prices, as there are not enough overly concerning weather problems to really get this market excited. Much of Argentina is getting needed rains now, and every inch of rain continues to help their crop.
The Brazil Crop Roundup was at 111-112 million metric tons versus USDA January forecasts of 110 million metric tons. The Argentine Crop Roundup puts their soybean crop at 53-54 million metric tons versus USDA forecasts of 56 million metric tons.
Weekly export sales were disappointing at 22.3 million bushels for the 2017-18 marketing year. This put total marketing year sales at 1.067 billion bushels, 25 percent less than the previous marketing year.
For the week ending Jan. 18, March canola futures in Winnipeg were up $1.40 Canadian at $492.50 Canadian per metric ton. The Canadian dollar was up to .8043. This brings the U.S. price to $17.91 per hundredweight.
• Velva, N.D., $17.67 per hundredweight, February at $17.59.
• Enderlin, N.D., $18.25 per hundredweight, February at $18.25.
• Hallock, Minn., $17.58 per hundredweight, February at $17.62.
• Fargo, N.D., $18.40 per hundredweight, February at $18.25.
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 $17.55. February at $17.55. For the week ending Jan. 18, soybean oil was down 84 cents at $32.23 on the March contract.