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House passes farm bill; legislation now goes to president's desk

opinion

Jenny Schlecht / Agweek

Upper end of the trading range

Wheat

The wheat market started out explosively higher this week in the Kansas City and Chicago contracts with Minneapolis tagging along. There were no deliveries against the Chicago May contract on April 30 and May 1. This lack of delivery pushed the Chicago May contract up 34 cents in two days. It was obvious that funds were covering short positions. The latest Commodity Futures Trading Commission data released April 24 showed funds adding 5,000 net short positions in Chicago.

The spring wheat market was able to shrug off bearish numbers from the April 27 Stats Canada report. Stats Canada estimates 25.3 million all wheat acres, 12.8 percent higher than 2017. Spring wheat plantings were estimated at 18.2 million acres, 15.4 percent higher than 2017. Durum plantings are forecast to increase to 5.8 million, 11 percent higher than 2017. Spring wheat plantings remain considerably behind pace at 10 percent. This is up from 3 percent last week and compares to 36 percent normally. For the spring wheat belt both the six to 10 and eight to 14 day forecasts call for warmer than normal temperatures and normal chances of rainfall.

The Kansas Wheat Tour kicked off this week. The tour confirmed the crop was a full two to three weeks behind normal maturity. It was also confirmed that we are looking at below average yields due to smaller than average head sizes. First day yield results for the northern Kansas area came in at 38.2 bushels per acre. Colorado averaged 35 bushels per acre and Nebraska averaged 43 bushels per acre. Day two results showed a 35.2 bushels per acre yield for western Kansas. Oklahoma yields are estimated to be half of normal at 24.8 bushels per acre. It is expected that of the 4.1 million seeded acres, 2.355 million will be harvested reducing Oklahoma's final production to 58.4 million bushels. Kansas estimates were actually higher than 2014 and 2015 tour estimates.

Both July Kansas City and Chicago experienced heavy resistance as they approached March 2 highs of $5.6475 and $5.3175. These are very critical areas in the market. In the last 10 minutes of May 3 trade, both these levels were exceeded opening up the possibility of a higher run.

Australian farmers are planting wheat into some of the driest soil conditions in years. They experienced drought last year which reduced yields to the lowest levels in 10 years. Hot and dry weather is occurring throughout the Ukraine, which is also leading to consensus that record yields from 2017 will not be repeated. UkrAgroConsult has lowered its forecast for barley production twice to 7.75 million metric tons from 8.7 million metric tons in March.

Weekly export sales for all wheat totaled 16.4 million bushels with 8.6 million bushels for the 2017-18 marketing year. This puts total marketing year sales at 863.7 million bushels, 16 percent below the previous marketing year. Marketing year shipments total 758.8 million bushels, 12 percent below the previous year.

For the week ending May 3, July contracts for Minneapolis wheat were up 22 cents at $6.30, up 39.5 cents at $5.38 for Chicago wheat, and up 37.25 cents at $5.6775 for Kansas City wheat.

Corn

The corn market has had two great weeks of upward movement in a row gaining 22 cents. The December 2018 contract traded to within 6 cents of the July 2017 high. CFTC data ending April 24 showed the funds reducing their net long in corn 15,000 contracts to 123,000.

The market is closely monitoring the dry conditions currently being experienced in Brazil's second crop corn. Brazil corn production was lowered 1 million metric tons to 86.0 million metric tons by a private forecaster. South American weather has turned strangely dry for central and southern Brazil, with virtually no rain forecast for this tropical rain forest for the next two weeks. It is eerie that so little rain can fall in such a normally high rain area, but that is the current forecast, and it just so happens to be right during pollination of this second crop corn. Second crop corn accounts for roughly 70 percent of Brazil's total output.

Weekly crop progress puts corn at 17 percent planted versus the five-year average of 27 percent. Trade was expecting 15 to 20 percent. Northern and Great Lakes area states continue to lag the most. Corn emergence is rated at 3 percent compared to 6 percent for the five-year average.

The weekly crude oil report was bearish on face value, but futures responded positively. Crude oil stocks rose significantly more than expected to 435.96 million barrels. Gasoline stocks rose 1.17 million barrels to 237.98 million barrels, with trade expecting a decline of 600,000. The friendly number was a decline in distillate stocks 118.83 million barrels with trade expecting 121.33 million barrels. It feels like crude oil is trading demand versus supply. Weekly gasoline demand remains at the top end of the five-year average and we haven't even started the summer driving season.

If this market is trading demand, it's a good thing for ethanol and corn. Ethanol weekly production was up 4.67 percent versus last year to 7.224 million barrels. Stocks as of April 27 were 22.142 million barrels, down 4.61 percent versus last year.

Weekly export sales were solid at 1,069,200 metric tons. This puts yearly marketing sales at 2.008 billion bushels, 2 percent less than the previous marketing year. Weekly shipments of 1,474,300 metric tons put marketing year shipments at 1.217 billion bushels, 17 percent less than the previous year.

Soybeans

Soybeans were under pressure most of the week but saw a nice turnaround and spike higher going into the close on May 3. Planting weather forecasts have been improving and the trade was anxious for news from the U.S./China meeting May 3 and 4. Trade and tariff negotiations between the two superpowers will go a long way in the direction of the soybean markets in the near term until weather starts dominating the news again. Soybeans continue to chop around but are technically still in a long term uptrend.

Soybean meal backed off slightly mid-week after making new contract highs May 2 due to the drought Argentina saw during their growing season. Private estimates of 2018 Argentina soybean crop are drifting lower. The U.S. Department of Agriculture may have to lower their current 40 million metric tons estimate as private estimates are at 35 to 37 million metric tons and dropping. Argentina's harvest is now getting delayed by wet weather.

On the flip side, U.S. weather is looking much better in early May for planting progress. In the second soybean planting progress report of the year on April 30, soybeans were 5 percent planted versus 9 percent last year and 5 percent for the five-year average. Estimates were for 4 percent to be planted.

The USDA March soybean crush report showed slightly lower than expected crush numbers and soybean oil stocks that were slightly higher than expected. The USDA reported March U.S. soybean crush was 182.2 million bushels, slightly below average market expectations of 183.2 million bushels. This was above last year's March crush of 160.8 million bushels, a new all-time record crush for any month, surpassing the previous record of 176.3 million bushels set in December 2017.

It is being asked by a few private groups for a federal court to rule whether the Environmental Protection Agency has violated the law granting a number of small (and now some larger) refineries exemptions from renewable fuel laws.

CFTC data on April 24 showed the funds taking a few net longs off the board, moving from net long 193,000 contracts to net long 170,000 contracts.

November soybean resistance is still the April 2 high of $10.60. Support is the 20-day and 50-day averages, with the greater one being the 20-day moving average of $10.345. Support is in at the $10.25 area and then at $10.10. Soybeans are still technically in a long-term uptrend that started the end of May 2017. The CME Group increased daily price limits starting May 1 for soybeans, moving from 65 cents to 75 cents. For the week ending May 3, July 2017 soybeans were down 3 cents at $10.5325 and November soybeans are up 2.5 cents to $10.495

Canola

For the week ending May 3, canola July futures in Winnipeg were down $4.30 Canadian to $528.10 per metric ton. The Canadian dollar traded up .0003 at 0.7790. This brings the U.S. price to $18.66 per hundredweight.

• Velva, N.D., $18.47 per hundredweight, September at $17.44.

• Enderlin, N.D., $19.18 per hundredweight, September at $18.04.

• Hallock, Minn., $18.86 per hundredweight, September at $17.65.

• Fargo, N.D., $19.25 per hundredweight, September at $18.15.

Barley

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 bid is at $3.00 in New Salem, N.D. Barley plantings are at 26 percent nationally versus 31 percent planted last year and the five-year average of 44 percent planted

Durum

Cash bids for milling quality durum are $6.00 in Berthold and at $5.50 in Dickinson, N.D.

Sunflower

Cash sunflower bids in Fargo were at $17.85, October at $18.75. For the week ending May 3, soybean oil was down 2 cents to $30.75 on the July contract.