Weather concerns provide support
The week started out relatively mundane with the Feb. 5 Stats Canada report. Stats Canada's quarterly grain stocks report estimates all Canadian wheat ending stocks as of Dec. 31, 2017, at 23.6 million metric tons. This was slightly below expectations of 23.9 million metric tons. This compared to 24.09 million metric tons on Dec. 31, 2016 — a 2.2 percent decrease. On-farm stocks decreased 5.1 percent to 19.3 million metric tons while commercial stocks were up 13.5 percent at 4.2 million metric tons. The March Minneapolis price touched $6 but held firm in Feb. 5 trade.
Trade quickly dismissed the report and continued its buying of the Kansas City contract. Feb. 6 and 7 saw 18-cent gains as traders have been buying this contract on any recent breaks. The July Kansas City contract shows heavy resistance at $5.10. Although we traded to $5.15 and it looked like a possible breakout, contracts retreated in advance of the Feb. 8 WASDE report.
The monthly World Agricultural Supply and Demand Report was released Feb. 8. All wheat stocks for the 2017-18 crop were increased 20 million bushels to 1.009 billion bushels from last month with trade expectations of 990 million bushels. Exports were lowered by 25 million bushels but the U.S.Department of Agriculture increased domestic food use for wheat by 5 million bushels.
U.S. exports were lowered because of higher expected exports from Argentina, Russia and Canada. USDA estimates world ending stocks for 2017-18 at 266.1 million metric tons compared to the average pre-report trade guess of 267.8 million metric tons. Former Soviet Union production was increased slightly to 142.15 million metric tons. These numbers were met with initial selling in both the Chicago and Kansas City contracts, with Minneapolis holding its ground.
Commodity Futures Trading Commission data shows that there was a heavy buyback of short positions for the week ending Jan. 30. Net short Chicago positions declined from -145,000 to -97,000. Net short Kansas City declined from -16,000 to -1,900.
Weekly export sales totaled 415,500 metric tons with trade expectations of 200,000 to 500,000 metric tons. Cumulative export sales for the year are running 11 percent behind last year at 764.4 million bushels. Shipments of 577.9 million bushels are running 5 percent below last year.
For the week ending Feb. 8, March contracts for Minneapolis wheat were up 9.25 cents at $6.13, up 9.5 cents at $4.5625 for Chicago wheat, and up 11.25 cents at $4.745 for Kansas City wheat.
The corn market started Feb. 4 trade with lower than expected rainfall through Brazil, and it appeared we were heading for a higher opening week until trade news put a damper on things in Feb. 5 trade. China is launching an anti-dumping/anti-subsidy investigation into U.S. imports of sorghum. The U.S. accounts for nearly 90 percent of total sorghum arrivals into China as it is used in livestock rations and liquor. This announcement put a negative tone on the grain markets in Feb. 5 trade as a number of analysts fear China is retaliating after the U.S. placed import tariffs on Chinese imported solar panels and washing machines a few weeks ago.
Even with this negative announcement, the corn market held up well, but we had some help with another good week of exports. Weekly export sales posted another solid week at 1,769,600 metric tons, which was at the higher end of trade expectations. Taiwan purchased 55,000 metric tons of corn from the U.S., but South Korea passed on their tender for 165,000 metric tons, indicating that corn prices were too high for them given currency exchange.
The monthly WASDE report was released Feb. 8. Projected U.S. corn ending stocks for 2017-18 were lowered to 2.352 million bushels, down 125 million bushels due to a projected increase in exports. Exports were increased due to export competitiveness with the weaker dollar and reduced export projections for Argentina and Ukraine. This compared to the average trade guess of 2.468 billion bushels.
Ethanol production for the week ending Feb. 2 averaged 1.057 million barrels per day. This is up 1.63 percent versus last week and up 0.19 percent versus last year. Total ethanol production for the week was 7.399 million barrels. Stocks as of Feb. 2 were 23.489 million barrels. This was up 1.93 percent versus last week and up 6.36 percent versus last year. Corn used in last week's production is estimated at 109.96 million bushels bringing cumulative usage for ethanol to 2.51 billion bushels.
For the week ending Feb. 8, March was up 4.25 cents to $3.6575 and May was up 3.75 cents to $3.7325.
The soybean trade saw a choppy trade this week as Argentina weather forecasts seem to vary daily. Argentina weather continues to support this market, with soybean meal prices leading the way. Argentina is the No. 1 exporter of soybean meal in the world, more than double what Brazil exports and almost three times the volume that the U.S. exports. Seventy percent of Argentina's crop area is under moderate to severe stress making upcoming rains vital to prevent further losses in yield. There is not much in the way of major issues with excess moisture at the moment in Brazil as they head into their main harvest months.
Early week pressure in soybeans was mainly due to the CFTC data on Jan. 30 that showed the funds shrinking their net short positions drastically more than was expected, moving from net short 82,000 contracts to net short only 22,000 contracts. For the week ending Feb. 8, March soybeans were up 9 cents, July 2017 soybeans were up 8.5 cents, and November soybeans were up 5.5 cents.
The USDA report on Feb. 8 was slightly bearish, but the market did not react that way. U.S. stocks were raised due to poor exports. Brazil and Argentina production numbers also canceled each other out.
U.S. ending stocks came in near the upper end of the average estimates and got raised 60 million bushels to 530 million bushels. The average estimate was for the U.S. stocks to come in at 486 million bushels. The large stocks number has to do with an aggressive cut of 60 million bushels to the U.S. export number. The USDA's world ending stocks number came in at 98.1 million metric tons versus average trade estimates of 98.6 million metric tons and January estimates of 98.6 million metric tons
Soybeans broke back through the highest moving average, the 100-day moving average of $9.87 again, which is now support. $9.565 and then $9.445 are technical chart support marks. Resistance for March soybeans is the recent highs of $10.0475.
For the week ending Feb. 7, March canola futures in Winnipeg were up $4.80 Canadian at $498.20 Canadian per metric ton. The Canadian dollar was down .0085 to .7967. This brings the U.S. price to $18 per hundredweight.
• Velva, N.D., $17.73 per hundredweight. March at $17.91.
• Enderlin, N.D., $18.39 per hundredweight. March at $18.39.
• Hallock, Minn., $17.77 per hundredweight. March at $17.95.
• Fargo, N.D., $18.30 per hundredweight. March at $18.45.
Stats Canada reports canola stocks at a record high 14.146 million metric tons as of Dec. 31, 2017, up 5.7 percent from 2016. This reflects record canola production of 21.3 million tons.
Cash feed barley bids in Minneapolis were at $2.85, while malting barley received no quote. The Berthold, N.D., bid is $2.45 and CHS Southwest New Salem, N.D., bid is $2.50.
Stats Canada reports barley stocks decreased 6.1 percent from Dec. 31, 2016 to 6.1 million metric tons. The decline was due to an 8 percent decrease in on-farm stocks to 6.1 million metric tons.
Cash bids for milling quality durum are $6 in Berthold and at $5.75 in Dickinson, N.D. Stats Canada reports durum stocks down 21.4 percent to 4.825 million metric tons.
Cash sunflower bids in Fargo were at $17.40, March at $17.50. For the week ending Feb. 7, soybean oil was up 5 cents at $32.56 on the March contract.