Favorable growing conditions affect markets
The wheat market experienced very choppy trade this past week with Kansas City contracts taking a 20 cent hit in June 4 trade. All contracts recovered for the week but would typically open strong daily only to fade and close near the lower end of the daily trading ranges.
The first spring wheat condition ratings for 2018 have 70 percent of the crop rated good to excellent, 26 percent fair and only 4 percent poor to very poor. Spring wheat emergence is at 81 percent, compared to 82 percent for the five-year average. Winter wheat condition ratings declined 1 percent to 37 percent good to excellent, 28 percent fair and 35 percent poor to very poor. Eighty three percent of the crop is headed, which is right at the five-year average. Harvest has started in the southern plains, with 5 percent of the winter wheat crop harvested compared to 4 percent average.
The U.S. dollar was roughly 70 cents lower on the week and the Russian Ruble has been rangebound since April 11. The big problem, though, is that Black Sea Region wheat prices are still $30 to $40 per metric ton cheaper than U.S. ports based on currency exchange. So the U.S. dollar's recent run up since April 17 is having negative consequences on export activity.
Combines will be telling the story in the next few weeks in Kansas. Yields may not be as good as some early initial reports out of Oklahoma. Abandonment acres will also be a big question. We will see if next Tuesday's U.S. Department of AGriculture report alludes to that or not. Overall, though, it appears that poor export numbers will be increasing ending U.S. stocks.
Private analysts are estimating 15 percent of the Russian winter wheat belt in extreme dry conditions and about 30 percent deficient on moisture. There are current estimates for around a 5 percent below normal crop. The Russian northern spring wheat belt has received about twice the normal amount of rainfall, which points to a 2-5 percent decrease in yields from normal in early estimates. These early estimates point to around a 68-70 million metric ton crop versus the record 85 million metric ton crop last year. China National Grain and Oils Information Center estimates Chinese wheat production at 126.7 million metric tons, the lowest in four years.
Weekly export sales for all wheat totaled 9 million bushels with a 700,000 bushel cancellation for the 2017-18 marketing year. This puts total marketing year sales at 872 million bushels, 16 percent below the previous marketing year. Marketing year shipments total 823.8 million bushels, 19 percent below the previous year. Weekly export inspections totaled 12.5 million bushels. Inspections for 2017-18 now total 876 million bushels, 13 percent lower than last year and above USDA's projected 14 percent decline.
For the week ending June 7, July contracts for Minneapolis wheat were down 6.5 cents at $5.975, up 3.5 cents at $5.2675 for Chicago wheat and up 3.75 cents at $5.445 for Kansas City wheat.
After making new highs a couple weeks ago, corn has turned negative, and selling pressure has pushed December corn back below the $4 mark to begin the month of June. Corn futures traded to higher highs and lower lows than the previous trading day on June 7, a technical reversal. Corn futures are trading back to lows last seen on April 4, the day China first announced retaliatory tariffs against the US.
The trade seems to be acting like summer is over already and a 180 bushel per acre crop is already guaranteed as we are just starting the June month. It is amazing how the six-to-10-day and eight-to-14-day forecasts can change so fast and affect these markets. At the beginning of the week the extended forecast models showed hot and dry the next two weeks across the majority of the Midwest. On Wednesday it switched to showing mostly normal to below normal temperatures with an above average chances for moisture.
The trade puts a lot of stock in these extended forecasts this time of year, even though forecasts that far out have conflicting weather models. If this forecast holds true though, it is negative the markets as this crop continues to look really good and it would be without many threats in the near future. It is still early in the growing year so anything can happen, but right now this market needs adversity to push these longs to add more positions and not liquidate them instead. Corn doesn't need a ton of rain to get off to a fast start this time of year; 90-degree days do that. What will be important is when we get to mid-June and beyond to see if we can get constant rains.
Corn closed back below the support of $4.0225. The lowest moving average is the 200 day moving average, which is next support at $3.98. The trade could be searching to bring it down to major support down at $3.925 to $3.95. December corn made new contract highs on May 24 that were also seen last July at $4.295, which is new resistance.
Corn crop condition ratings are at 78 percent good to excellent versus 79 percent last week. The rest of the crop is at 19 percent fair and 3 percent poor to very poor. Average trade estimates were for 79 percent good to excellent ratings. These early crop conditions show that there is the potential for high yields in corn if we get the rainfall this year. Corn planting progress as of June 3 showed corn was 97 percent planted versus 95 percent last year and 95 percent for the five-year average. Last week, U.S. farmers were 92 percent planted. This was right at trade estimates. As of June 3, corn was 86 percent emerged versus 84 percent last year and 83 percent for the five-year average.
Commodity Futures Trading Commission data on May 29 showed the funds very slightly increasing their strong net long stance, moving from net long 200,000 contracts to net long 202,000 contracts. For the week ending June 7, July corn was down 15.25 cents and December corn was 15 cents lower.
Soybeans continue their downward slide and have seen a dip of 65 cents the last eight trading sessions. There continues to be a lack of news from the U.S./China trade talks, and no news is not good news when it comes to these trade negotiations. Pressure also continues to come from a lack of progress in trade negotiation talks with our other biggest trading partners. Export sales this week were very disappointing, a casualty from the ongoing tariff threats. The monthly World Agricultural Supply and Demand Estimates report on June 12 could show lower export numbers ending stocks in this report due to these trade issues.
This year's U.S. crop has gotten off to a great start, and it seems the trade is saying that it needs some solid news that we are not going to see another record crop this fall. There is a lot of summer left for the weather patterns to change, but for now the weather is cooperating after a late start to the spring. The extended forecast is now showing below normal temperatures and above normal chances of precipitation in the eight-to-14-day forecast across the Midwest. This comes after just two days after it showed extreme heat and no moisture in this same outlook report on June 4. If that weather pattern transpires, it will continue to support crop development.
The funds and analysts trade these extended weather reports, so it could make for a very volatile and interesting summer. The funds need a reason to add to their heavy net long positions. CFTC data on May 29 showed the funds surprisingly adding to their net long positioning, moving from net long 98,000 contracts to net long 107,000 contracts. They were net long 193,000 contracts a month and a half ago.
For the first soybean crop condition ratings of the year on June 4, soybeans were at 75 percent good to excellent, 21 percent fair and 4 percent poor to very poor. Average trade estimates were for 74 percent good to excellent ratings. Soybean plantings were well ahead of pace, and as of June 3, soybeans were 87 percent planted versus 81 percent last year and 75 percent for the five-year average. Estimates were for close to 90 percent to be planted. As of May 24, soybeans were 68 percent emerged versus 55 percent last year and 52 percent for the five-year average.
Old crop soybean futures dipped below $10 for the first time since May 18. Support for November soybeans at $10.10 and then the 200-day moving average at $10.07. November soybean resistance is still the April 2 high of $10.60, and if we break that it is the Jan. 16 high of $10.80. For the week ending June 7, July soybeans were down 47 cents and November soybeans were 43 cents lower.
For the week ending June 7, November canola futures in Winnipeg were down $9.60 at $513.40 Canadian per metric ton. The Canadian dollar was down .0005 to .7707. This brings the U.S. price to $17.95 per hundredweight.
• Velva, N.D., at $18.18 per hundredweight, September at $17.07.
• Enderlin, N.D., at $19.13 per hundredweight, September at $17.66.
• Hallock, Minn., at $18.37 per hundredweight, September at $17.29.
• Fargo, N.D., at $19.20 per hundredweight, September at $17.85.
Cash feed barley bids in Minneapolis were at $2.85, while malting barley received no quote. Berthold, N.D., bid is $2.60 and CHS Southwest New Salem, N.D., bid is $3.
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 $18.15 and at $18.75 for October. For the week ending June 7, soybean oil was down 58 cents at $30.65 on the July contract.