U.S. and global trade tension
The wheat market started out sharply higher in May 29 trade with Kansas City and Chicago. July contracts reached new 2018 calendar-year highs only to reverse and close lower on the day. Kansas City reached $5.7475 and Chicago reached $5.54. So both the Kansas City and Chicago contracts have been making higher highs the last few times they have rebounded off support levels. Minneapolis reached $6.495, missing the May 24 high of $6.51.
Winter wheat condition ratings improved 2 percent in the good to excellent category to 38 percent, fair is 28 percent (-1 percent) and poor to very poor is 34 percent (-1 percent). Winter wheat headed is at 73 percent compared to 75 percent for the five-year average. Spring wheat plantings are at 91 percent compared to 89 percent for the five-year average. Trade was expecting 90 percent. Spring wheat emergence is at 63 percent compared to 68 percent for the five-year average. Progressive Ag's winter wheat yield model increased .35 bushels to 48.07 bushels per acre nationally and is now only slightly below the trend of 48.94.
Weather models showed 80 percent coverage for the Canadian and U.S. spring wheat areas in the five-day runs on May 30 trade which added to follow through pressure. The Global Forecast System model also showed an increased chance of rain in the 11 to 15-day run for eastern Australia. Dry conditions linger in southern Russia, while cold and wet conditions hinder planting progress of their spring wheat in the Ural mountain region and western Siberia.
The U.S. Department of Agriculture is currently estimating winter wheat yield of 647 million bushels, 14 percent below 2017. This is the big unknown now. There is talk of larger abandonment acres due to Kansas and Oklahoma farmers planting cotton, which is profitable. However, there are reports that early yields in Oklahoma are coming in better than expected.
Weekly export sales for all wheat totaled 11.0 million bushels with 1.1 million bushels for the 2017-18 marketing year. This puts total marketing year sales at 872.4 million bushels, 16 percent below the previous marketing year. Marketing year shipments total 815.3 million bushels, 15 percent below the previous year.
For the week ending May 31, July contracts for Minneapolis wheat were down 32.25 cents at $6.12, down 16.75 cents at $5.2625 for Chicago wheat, and down 21.5 cents at $5.425 for Kansas City wheat.
December corn reached $4.2875 in the May 28-29 overnight session, up 3.75 cents before reversing lower in May 29 trade. The market broke 9 cents lower at one point on improved chances of rainfall due to a strengthening jet stream in the 11-to-15-day forecast. Dry conditions linger with Brazil's second crop corn, although rainfall chances increased this week, which added to downward pressure.
The U.S. corn crop appears to be off to an excellent start, with 79 percent rated good to excellent. This compares to last year's rating of 65 percent and trade expectations of 70 percent. Fair ratings are at 18 percent and poor to very poor is rated at only 3 percent. Corn emergence is at 72 percent versus 69 percent for the five-year average. U.S. corn plantings are essentially wrapped up at 92 percent compared to 90 percent normally. Michigan and Ohio lag 20 percent behind normal pace.
December corn support is currently $4.105, which is a major retracement level. If $4.105 does not hold, the next support would be $4.045. Funds increased their net long position 8,000 contracts to 200,000 in the week ending May 22.
Ethanol production for the week ending May 25 averaged 1.041 million barrels per day, up 2.06 percent versus last year. Total ethanol production for the week was 7.287 million barrels. Stocks as of May 25 were 21.263 million barrels, down 6.59 percent versus last year. Stocks are starting their typical seasonal decline from the March to April peaks as seasonal summer driving demand kicks in. Corn used in last weeks production is estimated at 108.48 million bushels bringing cumulative corn usage to 4.13 billion bushels. Ethanol futures remain rangebound, as contracts failed to hold the upper end of the $1.5025 to $1.5375 range retreating into the $1.46 range. $1.4325 would currently be considered major support.
Weekly crude oil stocks declined more than expected to 434.51 million barrels. Gasoline stocks increased slightly to 234.43 million barrels versus ideas of a modest decline. Distillate stocks increased slightly to 114.63 million barrels versus ideas of a modest decline. Gasoline demand remains at the upper end of the five-year average range.
Weekly export sales were 993,100 metric tons, which was in the range of trade expectations. This puts yearly sales at 2.144 billion bushels, 1 percent above the previous marketing year. Weekly export shipments of 74.6 million bushels put total marketing year shipments at 1.479 billion bushels, 10 percent less than the previous year. It is becoming more apparent that USDA is understating U.S. corn stocks based on these numbers.
Traders were in a selling mood this past week as the trade awaits the next rumors from President Trump's camp regarding trade negotiations and tariffs. The yo-yo action in the soybean complex continued this week as U.S.-China trade negotiations are now not going as good as was rumored last week. The power struggle between the two superpowers is ongoing as both countries try to get the upper hand and see what the other country will concede. The White House made an announcement May 28 that it is once again threatening to impose the 25 percent tariff on $50 billion of Chinese goods "containing industrially significant technology." What goods will be included in the tariff policy should be finalized by June 15. Trump's renewed tariff threats could put the weekend's planned negotiation talks at risk. Trade Commerce Secretary Wilbur Ross is scheduled to meet with China starting on June 2.
Along with uncertainty with China, progress with the North American Free Trade Agreement is a big issue for soybeans. The U.S.-imposed import tariffs on steel and aluminum from Canada, Mexico and Europe on May 31. All three retaliated with import tariffs on U.S. goods right after the announcement. The reigniting global trade war sent fear in the stock markets and is also putting a wrench in the grain markets. The trucker strike in Brazil is mostly over, but it will take time to catch back up at the major export points.
Weather is a mixed bag as germination for row crops has been rapid. Warm weather is getting crops off to a fast start if they were planted into any moisture. Spotty rains fell across parts of the northern Midwest midweek, which helped relieve some trouble areas.
Planting progress across most of the U.S. is well above average pace. As of May 27, soybeans were 77 percent planted versus 65 percent last year and 62 percent for the five-year average. Estimates were for 67 percent to be planted. Soybeans were 47 percent emerged versus 34 percent last year and 32 percent for the five-year average.
November soybeans just barely breached the April 2 high of $10.60 to $10.605 on May 29 before retreating. If we could have held above $10.60, the January 16 weekly chart high of $10.80 is next resistance. Support for November soybeans at $10.10 and then the psychological $10 mark. There is a gap down at $10.1575 that traders like to fill after they run the market for a while.
Commodity Futures Trading Commission data on May 22 showed the funds lightening their net long positioning, moving from net long 108,000 contracts to net long 98,000 contracts. They were net long 193,000 contracts five weeks ago. For the week ending May 31, July soybeans were 23 cents lower and November soybeans were down 19.25 cents.
For the week ending May 31, canola July futures in Winnipeg were down $4.0 Canadian to $534.1 per metric ton. The Canadian dollar was trading at 0.7721. This brings the U.S. price to $18.71 per hundredweight.
• Velva, N.D, $18.59 per hundredweight, September at $17.47.
• Enderlin, N.D, $19.53 per hundredweight, September at $18.06.
• Hallock, Minn., $18.88 per hundredweight, September at $17.69.
• Fargo, N.D, $19.45 per hundredweight, September at $18.05.
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 CHS Southwest bid is at $3.00 in New Salem, N.D.
As of May 24, barley plantings are at 93 percent nationally versus 93 percent planted last year and the five-year average of 91 percent planted.
Barley was 47 percent emerged versus 34 percent last year and 32 percent for the five-year average. Barley ratings are at 69 percent good to excellent, 27 percent good, and 4 percent poor to very poor. These ratings are very close to last year at this time.
Cash bids for milling quality durum are $6.00 in Berthold and at $5.50 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.90, October at $18.75. For the week ending May 31, soybean oil was down 22 cents to $31.12 on the July contract.
As of May 24, sunflower plantings are at 30 percent nationally versus 38 percent planted last year and the five-year average of 25 percent planted.