Market volatility increases
It was a very wild week in the wheat complex as May Minneapolis futures have rebounded 61 cents from the April 3 low of $5.7175. Prospects of delayed planting and farmers switching away from spring wheat plantings gave speculative buyers the edge. The same was true in the Kansas City and Chicago contracts with condition ratings declining on the April 9 run.
Weekly condition ratings showed a 2 percent decline from the previous week. Of the 18 state averages, 30 percent is rated good to excellent compared to 32 percent last week and 53 percent last year. Fair ratings also declined to 35 percent versus 38 percent last week and 34 percent last year. Poor to very poor ratings are 35 percent versus 30 percent last week and 13 percent last year. The winter wheat belt also experienced much below normal temperatures over the weekend of April 7-8 with temperatures dropping into the low 20s. This event also enticed buying.
The U.S. Department of Agriculture put a damper on upward price movement with the April 10 monthly World Agricultural Supply and Demand Estimates report. U.S. wheat ending stocks were increased 30 million bushels to 1.064 billion bushels, which was higher than the highest trade estimate of 1.06 billion bushels. USDA stated that this was due to lower feed and residual use. World ending stocks for 2017-18 were estimated at 271.2 million metric tons which was also higher than the highest trade estimate of 270 million metric tons. This compares to USDA's March estimate of 268.89 million metric tons.
Forecasts for improved chances of rain from the National Weather Service in both the six-to-10-day and eight-to-14-day outlooks sent Kansas City and Chicago wheat futures lower in April 11 and April 12 trade. Open interest declined over 18,000 contracts in Kansas City and over 30,000 in Chicago during the last five sessions with mostly liquidation in Kansas City and short covering and rolling in Chicago.
An executive for the Grain Industry Association of western Australia stated that barley acreage is expected to increase 5 to 10 percent and most of those seedings will come at the expense of wheat.
Weekly export sales for all wheat totaled 6.9 million bushels with 4.4 million bushels for the 2017-18 marketing year. This puts total marketing year sales at 846.5 million bushels, 15 percent below the previous marketing year. Marketing year shipments total 710.2 million bushels, 10 percent below the previous year.
For the week ending April 11, May contracts for Minneapolis wheat were up 21.75 cents at $6.29, up 15 cents at $4.8725 for Chicago wheat, and up 10 cents at $5.1675 for Kansas City wheat.
The long-term trend continues to trend up as a wet, cool spring, and good export demand is giving bulls ammunition to push higher. The trade was interested in what the USDA was going to do with the U.S. stock number after they raised corn quarterly stocks as of March 1 to 8.89 billion bushels, a new record. The USDA increased U.S. ending stocks 55 million bushels to 2.182 billion bushels. This was near the average pre-trade estimates for an increase of 60 million bushels to 2.19 billion bushels. Feed usage was lowered 50 million bushels and exports were left unchanged.
The USDA lowered Brazil's corn production to 92 million metric tons versus trade estimates of 92.7 million metric tons and USDA's March estimates of 94.5 million metric tons. CONAB raised Brazil's corn crop estimate 1.3 million metric tons to 88.6 million metric tons. The USDA lowered Argentina's corn crop to 33 million metric tons versus trade estimates of 33.74 million metric tons and USDA's March forecast of 36 million metric tons. Dry weather in Argentina and drying conditions in the southern three of Brazil's safrina corn crop region are lowering production estimates.
A lack of fresh news after the April 10 WASDE report kept prices stagnant this week. The trade is in wait-and-see mode, looking to see how widespread this next system of storms will be. The next two weeks are expected to stay cool in the Midwest which could delay planting into May for the northern parts of the Midwest. This could continue to give row crop markets support as later planting could mean lower yields and less acres for the 2018 crop. It is still early enough for planters to catch up, but the forecasts need to change in order for that to happen.
In the first corn planting progress report of the year on April 9, corn was 2 percent planted versus 3 percent last year and 2 percent for the five-year average. Texas was the only state that is more than 1 percent planted at 58 percent planted.
Weekly export sales of corn were disappointing as they showed a total of 35.3 million bushels, with 433.1 million bushels for the 2017-18 marketing year. Total marketing year sales are at 1.897 billion bushels, 2 percent less than the previous marketing year.
Soybeans continue to trend higher as trade concerns eased over the weekend. November soybeans again failed to break through their contract highs this week but are still near the top end of the contract range.
Fresh U.S. export sales this week show a good number of bushels and are continuing to provide support for prices, even though U.S. ending stocks are over a half billion bushels. It is important for U.S. exports to find more destinations to ship to, especially with the uncertainty over China and poor export demand for our soybeans recently.
U.S. Gulf bids are considerably cheaper than Brazil port bids, and that may push typically seasonal Brazil soybean buyers to U.S. buyers, especially countries other than China. Brazil's free-on-board soybean prices were at $11.83 per bushel as of April 11, the highest since August 2016. This is 40-plus cents higher than U.S. Gulf bids.
Delayed planting this spring is going to be the news for the next month as weather continues to stay cool and wet in most of the Midwest. It is yet to be seen how many acres will get switched to soybeans, especially from expected wheat acres. Farmers can put a lot of seed in the ground in a short time frame; it is just going to be a matter of when they actually get a start to the spring.
The USDA came out with a bullish surprise in the April 10 WASDE report as they lowered U.S. ending stocks 5 million bushels to 550 million bushels versus average trade estimates that were expecting an increase of 19 million bushels to 574 million bushels. The USDA increased crush 10 million bushels and surprisingly kept exports unchanged.
Average trade estimates for world ending stocks were lowered more than expected due to a larger than expected decrease in Argentina's crop to 40 million metric tons. World ending stocks came in at 90.8 million metric tons versus pre-trade estimates of 92.9 million metric tons and 92.4 million metric tons last month.
The USDA raised Brazil's production estimates to 115 million metric tons (4.2 billion bushels) versus trade estimates of 115.25 million metric tons and USDA's March estimates of 113 million metric tons. CONAB raised Brazil's soybean crop 2 million metric tons to 115 million metric tons. The USDA lowered Argentina's soy crop to 40 million metric tons (1.5 billion bushels) versus pre-report estimates of 42.6 million metric tons versus USDA's March forecast of 47 million metric tons.
For the week ending April 11, May canola futures in Winnipeg were down $9.10 Canadian at $522.70 Canadian per metric ton. The Canadian dollar was up .0012 to .7954. This brings the U.S. price to $18.86 per hundredweight. The Canadian dollar remains in an uptrend, making U.S. prices more attractive
• Velva, N.D., $18.65 per hundredweight, September at $17.68.
• Enderlin, N.D., $19.44 per hundredweight, September at $18.32.
• Hallock, Minn., $18.83 per hundredweight, September at $17.94.
• Fargo, N.D., $19.55 per hundredweight, September at $18.40.
Cash feed barley bids in Minneapolis were at $2.85, while malting barley received no quote. The Berthold, N.D., bid is $2.60 and the CHS Southwest New Salem, N.D., bid is $2.90.
Cash bids for milling quality durum are $6 in Berthold and at $5.75 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.80, October at $18.60. For the week ending April 11,
soybean oil was down 4 cents at $31.53 on the May contract.