South American weather shaping up for soybeans
The wheat market continued to push lower early week from the hangover of Canada's 3 million metric ton increase in their Dec. 6 report. On Dec. 12, the U.S. Department of Agriculture's WASDE report lowered U.S. exports 25 million bushels for 2017-18 to 975 million bushels. This lower export forecast stems from higher than projected export competition from Canada. The net result was an increase in wheat ending stocks to 960 million bushels. The average trade guess was 941 million bushels. This rise in ending stocks pushed the Chicago and Kansas City contracts to new contract lows and had Minneapolis contracts clinging to hold $6.00 support levels.
In Dec. 13 and 14 trade we finally encountered two back-to-back up days for the first time since Dec. 1. Weekly exports came in at 588,800 metric tons with trade expectations of 250,000 to 450,000 metric tons. This puts total marketing year sales at 664.1 million bushels, 9 percent below the previous marketing year. Weekly shipments of 11.1 million bushels put the marketing year total at 453.3 million bushels, 8 percent below the previous year.
These were the best numbers since early November and helped provide support to the wheat complex. Sales of Hard Red Spring wheat were 208,232 metric tons which was only the fourth time in 2017 that was over 200,00 metric tons. Hard Red Winter wheat sales increased 26 percent from the week prior to 256,361 metric tons. However; Soft Red Winter wheat declined 30 percent to 27,814 metric tons. Japan purchased 148,000 metric tons of food quality wheat from the U.S., Canada and Australia on Dec. 14.
Strategie Grains estimates European wheat output steady at 142.3 million metric tons. Current European weather is favorable for winter wheat crop development. Eastern Europe has good snow cover and western Europe is experiencing warmer temperatures.
The latest Commodity Futures Trading Commission data has shown the funds increasing their net short from 137,000 to 152,000 contracts. One would think they would decide to take some of their profits before year-end which could lead to a short covering rally. However; for now they want to keep prices low to try and spark some better export activity.
For the week ending Dec. 14, March contracts for Minneapolis wheat were up 5.75 cents at $6.17, down 0.75 cents at $4.1825 for Chicago wheat, and up 0.25 cents at $4.1825 for Kansas City wheat.
The Dec. 12 WASDE report pegged corn ending stocks for the 2017-18 crop at 2.437 billion bushels, which is 40 million below the pre-report average. USDA raised corn use for ethanol production to 5.525 billion bushels, a bump of 50 million bushels. The rationale for higher corn use for ethanol stems from higher sorghum export commitments, which would prompt ethanol plants that are able to use either sorghum or corn to use more corn for ethanol.
Pre-report estimates ranged from 2.394 to 2.517 billion bushels. Projected farm gate prices remained at $3.20 per bushel. World ending corn stocks for 2017-18 were estimated at 204.1 million metric tons, up from the November number of 203.9 million metric tons. This increased demand gave the market a 3 cent boost, although by the end of the Dec. 12 session corn only saw 1 cent gains.
Weekly export sales came in at 866,900 metric tons, with trade expectations of 700,000 to 1.1 million metric tons. Since the number was right in the middle of expectations, corn futures remained steady, although the pace continues to lag last year by 37 percent. Week by week, it is getting more difficult to make up this pace and we would expect USDA to have to make further downside revisions to exports as we enter the spring.
Strategie Grains estimates European Union corn production at 59.9 million metric tons for 2018-19 an increase of 1 percent.
Ethanol production for the week ending Dec. 8 was 1.089 million barrels per day or 7.623 million barrels, down 1.71 percent from last week and up 4.71 percent from last year. Stocks as of Dec. 8 were 22.374 million barrels. This is down 0.75 percent versus last week and up 17.29 percent versus last year. Corn used in last week's production was 113.36 million bushels bringing cumulative corn used for ethanol production is 1.63 billion bushels.
For the week ending Dec. 14, March was down 4.25 cents to $3.485 and May was down 4.25 cents to $3.5675.
Soybeans were under pressure this week as bullish news is a rarity this time of year. Soybeans did not see much of an initial reaction as the USDA report came out on Dec. 12, but they did finish the rest of the week under pressure. The report was considered slightly negative as ending stocks were raised 20 million bushels to 445 million bushels. This was close to the trade estimates. The increase in stocks was due to a 25 million bushel decrease in exports. The USDA left South American production unchanged for now at 108 million metric tons.
The trade switched quickly back to trading South American weather after Tuesday's reports were not filled with any surprises. Pressure in the soybean complex has been due to beneficial rain forecasts for Argentina. Improving weather forecasts in Argentina and southern Brazil are taking its toll on row crop prices. Rains are forecast for this weekend and into next week for Argentina, and long-term forecasts are showing above normal rainfall prospects. The amounts and how widespread the coverage is will go a long way in determining which direction we will trade heading into the end of the year.
Private and government estimates are starting to make their way into the news as we get into South America's summer months. CONAB updated their estimates for Brazil's soybean crop Tuesday morning. CONAB increased Brazil's soybean crop to 109.2 million metric tons versus prior forecast of 106.4-108.6 million metric tons and 114.1 million metric tons last year. Brazil's weekly crop roundup puts soybean production at 109-110 million metric tons versus USDA's forecast of 108 million metric tons. Ag Rural puts Brazil's soybean crop at 112.9 million metric tons. So far weather has been favorable for the main growing area's of Brazil, so the numbers will probably come in larger than the USDA's projection of 108 million metric tons.
Argentina's Rosario exchange raised its 2017-18 estimates for their soybean crop to 54.5 million metric tons versus USDA estimates of 57 million metric tons. Argentina's crop roundup puts soybean production at 53 million metric tons.
For the week ending Dec 14, January 2017 soybeans were down 22 cents and March soybeans were down 22.75 cents. Monthly resistance marks for soybean futures start at $10.325, this past summer's high set in July. The $10.54 mark set in July of 2015 and then $10.80 which was established this past January are next monthly resistance levels.
Weekly export sales are at 1.389 billion bushels, 16 percent less than the previous marketing year.
For the week ending Dec. 14, January canola futures in Winnipeg were down $11.1 Canadian at $494.0 metric tons Canadian. The Canadian dollar was up at .7839. This brings the U.S. price to $17.64 per hundredweight.
• Velva, N.D., $17.13 per hundredweight, January at $17.28
• Enderlin, N.D., $17.74 per hundredweight, January at $17.74
• Hallock, Minn., $17.31 per hundredweight, January at $17.42
• Fargo, N.D., $18.15 per hundredweight, January at $17.90
Cash feed barley bids in Minneapolis were at $2.65, while malting barley received no quote. The Berthold, N.D., bid is $2.25 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 $6.25 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.70. December at $17.55. For the week ending Dec. 14, soybean oil was down 35 cents at $33.19 on the January contract.