Brazil's record crop continues to get larger
Wheat The monthly World Agricultural Supply and Demand Estimates report was released March 9. U.S. stocks came in at 1.129 billion bushels compared to 1.139 billion bushels from January. The average guess was 1.136 billion bushels. Imports were l...
The monthly World Agricultural Supply and Demand Estimates report was released March 9. U.S. stocks came in at 1.129 billion bushels compared to 1.139 billion bushels from January. The average guess was 1.136 billion bushels. Imports were lowered 10 million bushels. Spring wheat stocks declined 8 million bushels and currently show 30.9 percent stocks/use ratio. This compares to 58.6 percent for Kansas City hard red winter wheat and 68.8 percent for Chicago soft red winter wheat. USDA average farm price for wheat remained unchanged at $3.85 per bushel. World production increased 2.83 million metric tons with larger crops in Argentina and Australia and a slight decline in the European Union. World ending stocks increased by 1.33 million metric tons to 249.94 million metric tons.
Look for weather to dominate this market in the next 45 days. The most recent U.S. Drought Monitor shows moderate to severe drought for most of Oklahoma, northern Texas, western Kansas and eastern Colorado, all of which are winter wheat growing regions. This area experienced a warm, windy, dry week with only scattered rain. This band expands into much of the southeastern U.S. which had 2-3 inches of moisture this past week but is experiencing above normal temperatures. This is leading to drought conditions likely to expand and intensify without additional rainfall.
March contracts are expiring, and we have seen May contracts decline closer to those levels. The high carry in both Chicago and Kansas City contracts is a limiting factor for upside momentum, but we are now entering the spring weather market. The 100-day moving average for May Minneapolis is $5.4325 with the 200-day moving average converging at $5.4125. May slipped below this level at $5.39. May Chicago 100-day moving average of $4.385 is converging with the 50-day moving average of $4.435. These support areas are currently holding.
Reuters reported that Egypt rejected two Russian cargoes and one Argentine cargo due to quality issues. The quality issue was not specified but the report stated it was not ergot.
The March 9 WASDE report kept U.S. corn stocks at 2.32 billion bushels from January, which was the average trade guess. Corn for ethanol was increased 50 million bushels while feed and residual usage was decreased 50 million bushels. USDA kept corn exports unchanged at 2.225 billion bushels. Projected farmgate price remained unchanged at $3.40 per bushel.
The big negative was Brazil production estimated at 91.5 million metric tons compared to 86.5 in January. This 4 million metric ton increase was based on record high first crop yields and rapid planting progress of second crop corn in parts of the country. Argentina production was increased 1 million metric tons to 37.5 million metric tons due to higher than expected yields from early plantings. World ending stocks increased 3.08 million metric tons to 220.68 million metric tons.
Ethanol exports were 121.7 million gallons in January. This is up 40 percent from last year and a new record for the month. The previous monthly record was 86 million gallons in 2014. Brazil imported 59 million gallons compared to 6.5 million gallons last January. Dry distillers grain exports totaled 937,628 million tons in January, also a new record. The previous record was 904 million tons in January 2014. The $3.30 to $3.70 futures levels have provided a good demand base for U.S. corn.
A 1 percent increase in the ethanol share of gasoline consumption moving from E10 to E11 would consume 530 million bushels, or one-fourth of current carry out.
Ethanol production for the week ending March 3 averaged 1.022 million barrels per day. This was down 1.16 percent versus last week and up 4.5 percent versus last year. Total production for the week was 7.154 million barrels. Stocks as of March 3 were 22.856 million barrels. This is down 1.02 percent versus last week and down 1.94 percent versus last year. Corn used in last week's production is estimated at 107.31 million bushels. Corn use needs to average 97.967 million bushels per week to meet this crop year's USDA estimate of 5.35 billion bushels. Production has declined four of the last five weeks as margins have declined from over 50 cents in mid December to under 5 cents currently.
Soybeans closed triple digits down March 9 after the USDA report showed a large increase for Brazil's soybean crop and an increase in ending stocks. A large expected increase in U.S. soybean acres is also on the mind of the trade. May soybeans are trading at the lowest level since the end of November. Soybean oil and Dalian palm oil are at the lowest level since October. For the week ending Thursday, May soybeans were down 26.5 cents and November soybeans were 17.5 cents.
The ending stocks number came in at 435 million bushels versus 420 million bushels in February and higher than the average estimate of 418 million bushels. They upped the crush 10 million bushels, but they lowered the exports by 25 million bushels as a large increase in Brazil's production is expected to cut into our exports. World ending stocks came in at 82.82 million metric tons versus the average estimate of 81.52 million metric tons and is above February's 80.38 million metric tons.
Brazil's record soybean crop keeps getting larger. The USDA pegs Brazilian soybean production at 108 million metric tons versus the average estimate of 106 million metric tons. This is 4 million metric tons larger than USDA's February forecast of 104 million metric tons. Brazil's CONAB agency came out with an estimate of 107.6 early Thursday morning. The Argentine soybean production was raised slightly to 55.5 million metric tons.
Crude prices continued to add to their losses and are currently sitting between $49 and $50 in the May contract. Crude oil prices dove to eight-week lows as U.S. crude inventories rose for the ninth straight week. Crude oil prices fell over 5 percent (close to $3) on March 8, hitting eight-week lows. The U.S. Department of Energy reported a much larger increase than expected in domestic crude inventories. U.S. crude inventories rose by 8.2 million barrels in the last week. This was quadruple the analysts' expectations of a 2-million-barrel increase as refineries cut output and imports rose.
An almost certain interest rate hike in March is another negative producers haven't had to deal with for 10 years. A rising cost to service debt will lower profitability. With soybeans having less overhead cost, this could be another factor that could push more acres to soybeans, along with more favorable prices.
For the week ending March 9, canola May futures in Winnipeg were down $10.1 Canadian per metric ton to $526.5 Canadian per metric ton. The Canadian dollar traded down to 0.7403. This brings the U.S. price to $17.68 per hundredweight. Cash bids in Velva, N.D., were $17.07 per hundredweight for March and $17 for April. Enderlin, N.D., bids were $18.18 for March to May. Hallock, Minn., bids were $17.50 for March and $17.87 for April. Fargo, N.D., bids were $18.35 for March and $18.40 for April.
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 bid is at $2.40 in New Salem, N.D.
Cash bids for milling quality durum are $6.25 in Berthold and at $6.35 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $15.20 for April and May.
For the week ending March 9, soybean oil was $1.24 lower to $33.19 on the May contract.