All about the weather

Wheat

Minneapolis has been trading between $7.60 and $7.93 levels for the week. Buying interest above $7.90 levels has been sparse but there is plenty of support below $7.60. Chicago and Kansas City contracts have been holding the $5 levels after steep declines last week. With the strengthening of basis over the winter months at certain locations compared to harvest, the market is starting to signal that it would prefer your wheat over the winter months.

The September inverse to December has disappeared. It was as high as 35 cents a bushel two weeks ago. There is now a slight carry to December but not enough to justify paying for storage. But with the basis improvement it may pay in certain areas. With the inverse to near inverse, the market was signaling selling spring wheat off the combine and avoid paying for storage into next spring. We have agreed with that strategy up to this point, but pay attention to January through March basis. It does appear now that the market is leaning towards wanting your wheat for winter delivery so it doesn't get it all at once.

Corn

This week was all about the weather as six to 10 and eight to 14 day forecasts called for warm and dry weather in the western Corn Belt. Near-term forecasts had hot weather throughout much of the western Corn Belt including Iowa late week. This forecast gave the bulls the upper hand with fears of yield losses during pollination. Midweek, southern Nebraska received 3 to 5 inch rains with Iowa and Illinois mostly missing rainfall. The GFS and EU weather models are disagreeing on rainfall amounts but do favor coverage throughout northern Illinois, northeast Iowa, northern Indiana, Minnesota, Wisconsin, Michigan and Ohio.

The $1.50 hit in the U.S. Dollar to the $94 level also supported grain markets as a whole for the week. For the week ending July 20, September corn was up 14.5 cents to $3.9075 and December corn was up 15 cents to $4.045

E-10 is currently the most cost effective fuel in the competitive Fargo-Moorhead market. There is a lack of incentive for Flex Fuel Vehicle drivers to use E-85 as the spread has E-85 currently 22 cents cheaper than E-10. For non-flex fuel drivers, E-10 is currently 5 cents cheaper than E-15. This does not bode well for typically higher summer consumption of ethanol. Either corn prices need to decrease or crude oil prices need to increase to get the consumer to burn anything over E-10. You can speculate all you want about Mexico buying corn from Brazil and Argentina versus the U.S., but at the end of the day the corn market cannot afford the driving public balking at E-15 or higher blends.

The other problem is that ethanol stocks have been increasing during the summer driving season, when typically we see them decline into the late fall and early winter. Stocks as of July 14 were 22.137 million barrels. This is up 4.51 percent versus last week and up 4.63 percent versus last year. Ethanol production for the week ending July 14 averaged 1.026 million barrels per day. This is up 1.89 percent versus last week and down 0.29 percent versus last year. Total ethanol production for the week was 7.182 million barrels. Corn used in last week's production was 107.73 million bushels, bringing cumulative corn usage for ethanol to 4.84 billion bushels.

Despite a decline in corn condition ratings, Progressive Ag's yield model increased for the week over a bushel and a half. Next week's ratings and yield model run will be key to understanding if the corn crop escaped pollination damage for the week of July 15 to the 21.

Soybeans

Soybeans saw a decent rebound this week as weather concerns are giving this market another shot at a weather premium. Even with an up week, better than expected row crop yields in each of last four years is still keeping the trade reluctant to trim yields before there is a documented problem during the growing season. The extended forecast model July 23 and 24 will be very important and will probably give us the direction of these markets for the near future. Crop ratings after July 24's close will be one of the most important for the year.

This adverse weather is causing uncertainty as soybean yields are not determined yet and could get beat up by a hot August more than corn can as the pollination time frame closes. Soybeans are in the critical six-week time period for development. The soybean crop is made in August, and it will need timely rains to keep this year's crop close to trend yields. For the week ending July 20, August soybeans are were up 24.5 cents and November soybeans were 25.25 cents higher.

There have not been many large established rain systems that have fallen in the Midwest this year, which makes this year's crop that much harder to predict. There have been pockets that have received needed rains, but 30 miles down the road they have missed every rainfall. Conditions in the western Corn Belt remain dry and are in need of rain, while areas of the eastern Corn Belt are too wet. Parts of states like Ohio, Wisconsin and Northern Illinois do not need rainfall at the moment.

The Pro Ag yield model was higher at 46.83 bushels per acre, up 0.3 bushels per acre from last week and is slowly catching up to USDA's 48 bushels per acre estimate.

The June crush numbers were disappointing in this week's report and kept soybean prices in check early in the week. The NOPA June crush came in at 138.074 million bushels. The trade was looking for 140-144 million bushels versus 145.1 million bushels in June 2016. Oil stocks were at 1.703. The trade was looking for 1.714 versus 1.749 billion pounds last month and 1.975 billion pounds last year. USDA's 2016-17 annual soybean crush estimate might take a step back after another bearish crush number.

Canola

For the week ending July 20, November canola futures in Winnipeg were up $3.10 Canadian to $510.40 Canadian per metric ton. The Canadian dollar traded higher to 0.7940. This brings the U.S. price to $18.38 per hundredweight.

• Velva, N.D., $18.71 per hundredweight, new crop at $17.74.

• Enderlin, N.D., $18.56 per hundredweight, new crop at $18.39.

• Hallock, Minn., $18.61 per hundredweight, new crop at $17.71.

• Fargo, N.D., $19.80 per hundredweight, new crop at $18.10.

There is talk the recent heat blast in western Canada has already damaged some of the canola crop. Tight Canadian canola stocks and steady global demand for oilseeds continue to give this market support.

Barley

Cash feed barley bids in Minneapolis were at $2.05, while malting barley received no quote. Berthold, N.D., bid is $2 and CHS Southwest New Salem is $2.40.

Durum

Cash bids for milling quality durum are $8.50 in Berthold and at $8 in Dickinson, N.D.

2017 U.S. durum production is estimated at 57 million bushels, down from 104 million in 2016.

Sunflower

Cash sunflower bids in Fargo were at $17.10, with October-November at $16.20.
For the week ending July 20, soybean oil was up 73 cents at $33.97 on the August contract.