COLUMN: Market sees strength in U.S. dollar
WheatWith little news to get either the bull or bear camps excited, wheat continues to trade in a sideways pattern. Wheat fell to near contract lows in Kansas City. As good crop conditions continue to put pressure on the market. Global wheat cond...
With little news to get either the bull or bear camps excited, wheat continues to trade in a sideways pattern. Wheat fell to near contract lows in Kansas City. As good crop conditions continue to put pressure on the market. Global wheat conditions are also in good condition, which does not improve the outlook for large global wheat stocks. The futures complex closed in the red for all three wheat exchanges. For the week ending May 19, July contracts for Minneapolis wheat were down 7 cents at $5.28, down 6 cents at $4.68 for Chicago wheat and down 8 cents at $4.48 for Kansas City.
Colder weather failed to significantly hurt new spring wheat crops. High winter wheat crop ratings and nearly complete spring wheat planting weighs on these markets. Outside of the U.S., most winter wheat crop areas appear to be doing well, which is keeping noncommercial short for now. Exports are still poor and are cause for concern, limiting upside. The U.S. wheat conditions report showed no change for an above-average crop.
The news of the week was strength in the U.S. dollar index at midweek. After the Fed hinted at increasing interest rates in June, the dollar jumped considerably. This is bearish news for already poor exports. Crop conditions for Kansas City wheat are good and we are looking at the possibility of record yields. Drought concerns are gone. The main concern is if rains don’t stop in soaked areas, they could cause disease, and a wet harvest would affect quality. This is also the reason the Chicago to Kansas City spread keeps widening. Kansas City wheat is typically at a 20-cent premium to Chicago wheat, but at the moment, it’s Chicago wheat with a 20-cent premium to Kansas City.
As of May 15, 89 percent of the nation’s spring wheat crop was planted, compared to 64 percent for the five-year average and 77 percent last week. Winter wheat’s crop condition rating is 62 percent good to excellent, 30 percent fair and 8 percent poor or very poor. Last year’s ratings were 45 percent good to excellent, 36 percent fair and 19 percent poor or very poor. Sixty-eight percent of the nation’s winter wheat crop was headed, compared to 57 percent last week and 56 percent for the five-year average.
Weekly wheat export inspections were 13.5 million bushels for the week ending May 14. That brings marketing year totals to 708 million bushels, 12 percent behind last year. Weekly wheat export sales were 127.5 million bushels for the week ending May 12, but only 6.4 million bushels were for old crop 2015 to ’16 wheat.
The late week selloff might signal otherwise, but it was a quiet week in the corn market. Steady gains early in the week were negated by sharp losses May 19, leaving the week’s trade nearly unchanged.
For the week ending May 19, the July contract was down 0.75 cents at $3.90. New crop December contracts traded down 1 cent at $3.97.
Negative pressure entered the market late in the week after the Fed warned a June rate hike is possible. The dollar quickly gained 50 points, reaching about 95.25. The next session saw general selling in commodity markets.
The week opened with Informa releasing its acreage estimates. The firm expected corn to come in at 93.4 million acres, a decrease of 225,000 acres. The eastern Corn Belt, with all its planting delays caused by moisture, is the best candidate for switched acres. The change is small, though, leaving corn acres at high levels. The number of acres that could switch was limited from the beginning, as corn planting has progressed quickly. The U.S. Department of Agriculture will release a number June 30.
Corn planting was pegged at 75 percent complete as of May 15, on the mark with pre-report estimates, and 11 percent ahead of the previous week. The five-year average is 70 percent, and last year was 84 percent complete. Emergence increased from 27 percent to 43 percent as of May 15. The five-year average is 34 percent, and last year, corn was 48 percent emerged.
The Environmental Protection Agency proposed increasing the required ethanol mix in 2017, raising the amount to 14.8 billion gallons from 14.5 billion. This is well below a target set nearly a decade ago, but the EPA says the previous target is unachievable. Ethanol production for the week fell 1.46 percent to 6.636 million barrels. Stocks fell, as well, losing 0.7 percent at 21.103 million barrels. Corn use was at 99.54 million bushels, above the 98.291 million-bushel weekly requirement. Required corn use per week is now 98.2 million bushels. The USDA’s estimate is 5.25 billion bushels.
Export sales were strong, with net sales of 58 million bushels for 2015 to ’16, well above the 11.9 million bushels needed to meet USDA’s revised estimate of 1.725 billion bushels in export sales for the marketing year. Export inspections were 43.7 million bushels, down 3.27 percent from the previous week. Total shipments are now 1.04 billion bushels, 12 percent behind last year.
Soybeans saw mixed trade for the week, with the only positive day May 17. Mid- to late-week losses partially covered the gains, leaving trade nearly unchanged for the week.
Soymeal has been a major driver for soybeans as it trades at 18-month highs, having gained more than $120 in just 1.5 months.
Late-week trade was negative, but could’ve been worse. May 18 and 19 saw 16- to 22-cent losses, as funds refuse to give up bullish ideas. The downward trade was likely from profit-taking and a stronger dollar.
Informa released its estimates for soybean acres May 16, increasing its number by 770,000 acres to 83 million. Much of the trade talk is soybeans could see a 1 million-acre increase, but Informa doesn’t think so. Perhaps Informa thinks planting is too far along in other crops for a larger change to be made.
The May 16 crop progress report placed soybean planting at 36 percent complete, just ahead of the 32 percent average, but behind last year’s 41 percent. Nebraska and Ohio are struggling, as both are about 15 percent behind respective averages. North Dakota is more than double its usual pace, at 52 percent complete. Emergence was 10 percent compared to 11 percent last year, and a 9 percent average.
Export sales were 20.4 million bushels, well above the required 2.3 million bushels per week to reach USDA’s 1.74 billion-bushel projection, which was raised 35 million bushels on the May supply and demand report. Total commitments are 1.724 billion bushels, 5 percent behind last year. Export inspections were 7.2 million bushels for soybeans, well above the previous week. Total shipments are 1.584 billion bushels, down 7 percent from last year.
For the week ending May 19, the July contract was up 6.50 cents at $10.71. New crop November contracts traded down 1 cent at $10.53.
Cash feed barley bids in Minneapolis were unchanged at $2.45 per bushel, while malting barley received to quote. Berthold, N.D., showed bids of $2.25 and the CHS Southwest bid was $2.70 in New Salem, N.D.
As of May 8, barley is 90 percent planted, versus the 71 percent average and 93 percent last year. North Dakota and Minnesota are both about 40 percent ahead of averages at 87 percent and 95 percent complete.
Projected acres for barley have come in at 3.14 million acres, down 12 percent from 2015 and the fourth smallest seeding on record. North Dakota is at 800,000 acres (down 29 percent), Montana is at 1.01 million acres (up 4 percent) and Minnesota is at 100,000 acres (down 26 percent).
Cash bids for milling durum are unchanged at $6.25 per bushel in Berthold and unchanged at $6.25 in Dickinson, N.D. Projected acres for durum are 1.99 million acres, a 3 percent increase from 2015. North Dakota acreage is expected to increase 10 percent to 1.2 million acres, and Montana acreage is expected to increase 2 percent to 630,000 acres.
July Canola futures in Winnipeg, Manitoba, traded up $7.3 (Canadian) to $523.1 per metric ton (Canadian) for week ending May 19. The Canadian dollar traded down 0.0096 to 0.7634. This brings the U.S. price to $18.12 per hundredweight.
Cash bids in Velva, N.D., were $17.91 per hundredweight for May and $17.13 for September. Enderlin, N.D., bids were $18.39 per hundredweight for May and $17.55 for September. The Hallock, Minn., bid is $18.03 for May and $17.12 for September. Fargo, N.D., bids were $18.13 per hundredweight for May and $17.49 for September.
Cash sunflower bids in Fargo were $16.25 per hundredweight for May. Soybean oil traded down 65 cents for the week, to $31.85 on July contracts.
Sunflowers are 11 percent planted, compared to 4 percent for the five-year average, and 9 percent last year.