Rating declines spur market
Kansas City led the charge higher this week as winter wheat ratings saw significant declines in the past month. Kansas ratings were 14 percent good to excellent, down from 37 percent last month and 44 percent last year. Oklahoma was rated only 4 percent good to excellent. This led to heavy short covering and additional speculative buying early week. Precipitation forecasts are scant for the southern plains and the drought monitor expanded D3 extreme drought ratings this week in western Kansas, western Oklahoma and north Texas. This area has seen no rainfall in the past 30 days.
This was a 48-cent rally in five trading sessions in the Kansas City contract, and midweek we saw some selling pressure come in as traders took profit. There was a feeling that the rally was "too quick, too fast" and would cut into export sales.
The U.S. Dollar continued to trend lower at $88.65 levels late week. Wheat prices at the Black Sea Novorossiysk port increased $1 to $2 per metric ton at $194 to $196 per metric ton free on board for 12.5 percent protein and $184 to $185 per metric ton free on board for 11.5 percent protein. Smaller ports saw more significant increases of $3 to $7 per metric ton due to heavier demand from Turkey. The Ruble continues its increase but with high inventories, Russian wheat continues to move into Egypt at a brisk pace.
The other recent dynamic going on is spread trading selling Minneapolis and buying Kansas City. The Minneapolis over Kansas City spread was $2.09 in early November and has now contracted to $1.43. So far the Minneapolis contracts have been able to hold $6, as the market has enough respect for potential weather problems and the tightening stocks in higher protein wheat. However, if we do break under $6 in the short term, it will be largely because of spread activity.
For the week ending Feb. 1, March contracts for Minneapolis wheat were down 7.25 cents at $6.0725, up 10.75 cents at $4.5175 for Chicago wheat, and up 24.25 cents at $4.6725 for Kansas City wheat.
Corn found some support from positive wheat and soybean momentum to sneak back to the higher end of the narrow trading range. Dry weather is supportive in Argentina, and if soybean harvest delays continue in Brazil due to wet weather, that could affect their second crop corn plantings. According to a top Agriculture Ministry official, Argentina's corn crop will suffer yield losses due to drought and the planting area will decrease due to dry weather in the northern part of the country.
Corn saw another strong week of export sales. Exports have been supportive for prices the last couple weeks with the lower U.S. Dollar finally helping. We are also seeing short covering as the funds are finding a reason to lighten the load on their heavy short positions. For the week ending Jan. 31, March was up 5 cents, July was up 4 cents, and December corn was up 3.75 cents.
March corn snuck above $3.60 territory for the first time since Dec 4, which was the same day it lost 8 cents from the highs that day. March corn also closed above $3.60 for the first time since Nov. 8. Corn has gained 14 cents the last two weeks from the 2018 lows of $3.455. Corn broke through the 100-day moving average of $3.575. Resistance is the late October high of $3.6925 and then the 200-day moving average of $3.76. Support is the 20- and 50-day moving averages of $3.52.
Brazil's crop roundup puts the corn crop at 90-91 million metric tons versus U.S. Department of Agriculture forecasts of 95 million metric tons. Argentina's crop roundup puts the corn crop at 38-39 million metric tons versus USDA forecasts for 42 million metric tons.
Ethanol production for the week ending Jan. 31 averaged 1.04 million barrels per day. Weekly ethanol production decreased 2.07 percent from last week and is down 1.98 percent from last year. Corn use for ethanol was 108.14 million bushels, ahead of the 103.804-million-bushel pace needed for USDA's estimates of 5.525 billion bushels. Ethanol stocks are at 23.045 million barrels, down 3.17 percent from last week and up 5.37 percent versus last year.
After a strong 60-cent run up from the recent lows of $9.445 on Jan. 12 for March soybeans, soybeans took a step back mid-week and continue to have trouble finding support above $10. Hot, dry weather in Argentina and rains in Brazil that have been interrupting their harvest have been short-term positives for soybean prices. Brazil has a large crop in the field, so if weather shapes up, they still have more than 4 billion bushels to harvest that will put pressure back in the soybean complex. It comes down to how much trouble they have getting it harvested.
There is a chance of light rain in central Argentina in the near-term forecast, and that will be closely watched by the trade. Argentina forecasts only have limited moisture in the two-week forecast, but they seem to be increasing the chances slightly. This will continue to provide support if this forecast continues, but the market will reverse course in a hurry if they start to change these forecasts and they receive rains during their pod filling.
The weekly Argentina crop roundup puts their soybean crop at 52-53 million metric tons versus USDA forecasts for 59 million metric tons. The weekly Brazil crop roundup puts their soybean crop at 111-112 million metric tons versus USDA forecasts for 110 million metric tons.
Private Analyst Dr. Michael Cordonnier cut his Argentine soybean production number 1 million metric tons to 51 million metric tons but raised his Brazilian number by 1 million metric tons to 112 million metric tons.
Resistance for March soybeans is the recent highs of $10.0475. March soybeans support is the 100-day moving average of $9.88. $9.80 is next technical chart support. For the week ending Jan. 30, March soybeans were up 10.25 cents, July 2017 soybeans were up 9.75 cents and November soybeans were up 8.5 cents.
For the week ending Jan. 31, March canola futures in Winnipeg were up $3 Canadian at $496.70 Canadian per metric ton. The Canadian dollar was up .0015 to .8136. This brings the U.S. price to $18.33 per hundredweight.
• Velva, N.D., $18.05 per hundredweight, February at $18.05.
• Enderlin, N.D., $18.71 per hundredweight, February at $18.71.
• Hallock, Minn., $18.03 per hundredweight, February at $18.11.
• Fargo, N.D., $18.50 per hundredweight, March at $18.70.
Cash feed barley bids in Minneapolis were at $2.65, while malting barley received no quote. 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 $6.25 in Berthold and at $6 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.55, with March at $17.55. For the week ending Jan. 31, soybean oil was up 28 cents at $33.07 on the March contract.