All eyes on upcoming USDA report
The Australian January wheat contract was up 4.2 percent early week as unseasonably cold temperatures in the Southeast and drier than normal conditions in the Northeast fueled concerns about crop stress. German wheat quality is expected to be hurt due to recent heavy rains for the European Union's second largest producer. Production is expected to drop to 24 million metric tons, the smallest since 2012.
Despite these potentially price-friendly events, the wheat market had to deal with a negative Stats Canada quarterly stocks report released Sept. 6. On-farm stocks as of July 31 were 8.5 percent higher at 2.4 million metric tons. Commercial stocks rose 50.5 percent to 4.5 million metric tons. The net result was total wheat stocks up 32.6 percent to 6.9 million metric tons from a year ago.
The poorer quality of Germany's crop seemed to lend support to higher protein Minneapolis contracts, but the added bushels sent Chicago and Kansas City contracts lower.
The latest Commodity Futures Trading Commission data shows managed money increased their net short position 11,000 contracts to be net short 78,000. This is the largest short since early June. Technically the market remains heavily oversold as the 50-, 100- and 200-day moving averages are well above current trading levels. Short covering is possible, but for now with substantial Russian and Canadian supplies adding to world stocks, the bears are in control.
Weekly export sales totaled 13.8 million bushels, all for the 2017-18 marketing year. This puts total marketing year sales at 457.8 million bushels, on par with the previous marketing year. Weekly shipments of 8.3 million bushels put the marketing year total at 270.8 million bushels, 7 percent ahead of the previous year and on pace for total demand of 1.042 billion bushels.
For the week ending Sept. 7, December contracts for Minneapolis wheat were up 18 cents at $6.4975, down 1.5 cents at $4.3725 for Chicago wheat, and up 3.0 cents at $4.4175 for Kansas City wheat.
Corn prices stayed relatively flat this week as corn continues to struggle to find bullish news on a daily basis. After trading to two-week highs on Sept. 6, corn set back to where it started the week. Demand continues to stay strong as both ethanol use and exports are on point.
Weekly corn use for ethanol was the second highest on record and Mexico made four separate purchases in just over a week. For the week ending Sept. 7, December corn was down 1.25 cents.
Cool August weather kept corn maturity behind schedule and much of the corn in the northern Midwest needs to make it through September without a major frost event. So far there is no frost in the September forecast. The weather model is starting to warm to normal temperatures in the extended forecast with minimal rainfall expected.
Corn found resistance at the 20-day moving average of $3.605 and is now sitting at support that is the 10-day moving average of $3.54. In the week ended Aug. 15, funds added a large number of net long corn contracts to around 65,000 contracts, up from the 17,000 net short the week prior.
The weekly ethanol production report showed that ethanol production for the week is back up to near record levels with stocks continuing their downward trend. Ethanol production was at 1.06 million barrels per day. Weekly ethanol production increased 1.73 percent from last week and is up 6.21 percent from last year. Corn use for ethanol was 111.3 million bushels. Corn needs to average 105.36 million bushels per week to meet this marketing year's U.S. Department of Agriculture's use estimate of 5.5 billion bushels.
Soybeans gapped higher to start the holiday-shortened week and ending up with nice gains. Prices have rebounded nicely off the Aug. 16 lows of $9.21 due to fears this crop may not reach maturity. Cool August weather did not help soybeans catch up and it is keeping much of the northern Midwest crop behind schedule. However, frost scares are now in the extended forecast. The six-to-10- and eight-to-14-day forecasts have started to warm up and may provide the warm weather needed to finish out this crop. Rains did not fall in the dry areas of the Corn Belt, and a dry finish to the growing season is now expected.
Larger than expected fund shorts last week in soybeans and soybean meal also gave this market support. In the week that ended Aug. 29, funds added on to their short positions 5,000 contracts and are now net short 28,000 contracts. For the week ending Sept. 7, November soybeans were up 19.25 cents.
Soybeans tried and failed yet again to get over the November $9.80 resistance mark that has plagued soybeans since early August. In August, soybeans got over $9.80 for only a couple of hours right ahead of the 11 a.m. Aug. 10 USDA report, before crashing after the report's bearish yield numbers.
The U.S. Dollar Index is in a strong downward trend and is now at lows last seen in the first week of 2015. This is helping to keep soybeans in their recent uptrend. The Brazilian Real continues its trek higher, and these two index movement trends are keeping U.S. beans competitive in the global market. Palm oil futures are also back up to highs last seen the beginning of April.
November 2017 support is now $9.58 and then $9.15 and the recent lows of $9.07 we saw on June 23. Soybeans broke through $9.55 resistance and now $9.80 and after that there is the Pre-August report highs of $9.88 November futures-chart resistance.
For the week ending Sept. 7, November canola futures in Winnipeg were $5.30 lower at $492 Canadian per metric ton. The Canadian dollar traded .0172 higher to .8247 This brings the U.S. price to $18.40 per hundredweight.
• Velva, N.D., $17.65 per hundredweight, October at $17.27.
• Enderlin, N.D., $18.21 per hundredweight, October at $18.28.
• Hallock, Minn., $17.65 per hundredweight, October at $17.84.
• Fargo, N.D., $18.10 per hundredweight, October at $18.30.
Stats Canada reported that canola stocks declined 35.5 percent to 1.3 million metric tons as of July 31, 2017. On farm stocks fell 56.6 percent to 430,000 metric tons, while commercial stocks were down 16.6 percent to 918,000 metric tons. As of July 31, 2017, canola crushings were 9.2 million metric tons, while total exports were 11 million metric tons, both record amounts.
Cash feed barley bids in Minneapolis were at $2.10, while malting barley received no quote. Berthold, N.D., bid is $2, and CHS Southwest New Salem, N.D., bids were at $2.50. As of July 31, Canadian barley stocks rose 47.1 percent to 2.1 million metric tons.
Cash bids for milling quality durum are $6.75 in Berthold and at $6.75 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.45. October-November at $16.70. For the week ending Sept. 7, soybean oil was down 24 cents at $35.18 on the October contract.