Market trading big crop
The wheat market experienced very choppy to lower trade this week. The U.S. Department of Agriculture's monthly World Agricultural Supply and Demand Estimates (WASDE) report showed lower than expected U.S. ending stocks, but slight increases in world ending stocks.
2018-19 U.S. ending stocks are estimated at 946 million bushels versus 955 million bushels in May. 2017-18 stocks were 1.08 billion bushels versus 1.070 billion bushels last month. 2018-19 world ending stocks were 266.2 million metric tons versus 264.3 million metric tons last month. 2017-18 world ending stocks were 272.4 million metric tons versus 270.5 last month. Russian wheat production was trimmed 3.5 million metric tons to 68.5 million metric tons.
The market is keying off of dry conditions in Russia which could lead to further reductions. USDA kept Ukrainian wheat production at 26.5 million metric tons which given current weather is probably on the high side.
The Australian Bureau of Ag & Resource Economics (ABARES) reduced its forecast for Australian wheat production 1.8 million metric tons to 21.9 million metric tons. USDA is currently estimating 24 million metric tons. It is expected lower acres were planted due to dry conditions.
With the U.S. dollar keeping its head above $93.50, its becoming harder to attract buying interest due to uncompetitive U.S. prices over the Black Sea region. Interestingly, cash bids have been increasing in Kansas due to the smaller than average crop with elevators competing for bushels, which is supportive of Kansas City futures.
Winter wheat condition ratings improved 1 percent in the good to excellent category to 38 percent, fair is 27 percent (-1 percent) and poor to very poor remained at 35 percent. Winter wheat headed is at 91 percent compared to 90 percent for the five-year average. Winter wheat harvesting is at 14 percent complete versus 10 percent for the five-year average and 16 percent last year. Spring wheat conditions stayed the same at 70 percent good to excellent, 27 percent fair (+1 percent) and 3 percent poor to very poor (-1 percent). Spring wheat emergence is at 94 percent compared to 89 percent for the five-year average.
Weekly export sales for all wheat totaled 11.1 million bushels for the 2017-18 marketing year. This puts total sales for the new marketing year at 11.4 million bushels, 35 percent below the previous marketing year. Marketing year shipments total 11.4 million bushels, 57 percent below the previous year.
For the week ending June 14, July contracts for Minneapolis wheat were down 15 cents at $5.775, down 18.5 cents at $5.015 for Chicago wheat, and down 16 cents at $5.2225 for Kansas City wheat.
The June 12 WASDE report reduced 2018-19 U.S. corn ending stocks 105 million bushels from the May report to 1.577 billion bushels. This was a friendly number. In evaluating some of the world numbers, USDA did not trim Russian and Ukrainian production estimates despite ongoing dry weather conditions in that region. A number of private analysts think the USDA corn numbers are too high for both Brazil and Argentina due to their ongoing challenges with dry weather this past spring. The thought is USDA is anywhere from 5 to 9 million metric tons too high on these world numbers and further reductions are likely. These numbers point to a potentially bullish scenario if we encounter even the most minor of hiccups with U.S. weather.
Corn crop condition ratings are at 77 percent good to excellent versus 78 percent good to excellent last week. The rest of the crop is at 19 percent fair, and 4 percent poor to very poor. For now the market is taking the same "show me" approach that it did in the summers of 2016 and 2017. Until it sees a problem, it's not budging. But if U.S. corn planted acres come in at or below the March intentions number that certainly could excite this market. Informa just lowered its corn acreage estimate to 88.7 million acres from 89.0 earlier.
Weekly gasoline demand in the Energy Information Administration petroleum report was an all time record 9.878 million gallons per day. This remains a supportive factor for ethanol. Weekly ethanol production was 5.1 percent higher than this week last year. Corn usage for ethanol has been running 2.5 percent to 3.0 percent above last year the last 5 months which points to USDA's corn usage for ethanol number being too low.
Corn broke below December support of $3.925. The July gap at $3.8975 and the December gap at $4.10 look like realistic targets at this point. Commodity Futures Trading Commission data as of June 5 showed the funds rapidly decreasing their strong net long stance, moving from net long 202,000 contracts to net long 114,000 contracts. For the week ending June 14, July was down 14.75 cents to $3.63 and December was down 13.5 cents to $3.845.
The bleeding won't stop in the soybean complex as weather has been largely untroubling for the majority of the U.S. Soybeans have given up around $1.15 in the last 13 trading days to start the month of June. November soybeans blew right through the 2018 lows of $9.675 and saw its lowest close since Aug. 30, 2017. $9.395 is next support on the technical side of this oversold market. For the week ending June 14, July 2017 soybeans were down 42 cents and November soybeans were down 39.75 cents.
Not even a favorable USDA report on June 12 could stop the train wreck in the soybean futures as the potential tariff issue continues to hold soybeans hostage. The extended forecasts have started to turn hotter for much of the Midwest in the extended forecasts, but the timely rains across the U.S. is what continues to keep the trades attention. There is still enough summer for weather to turn adverse, but for the next week it still shows favorable growing weather.
The lack of news has flushed the net long specs entirely out of this market the last two weeks. The funds were net long 193,000 contracts two months ago and were still net long over 100,000 contacts a little over two weeks ago.
Ending stocks came in well below trade expectations for the second report in the row. 2018-19 U.S. ending stocks are expected to come in at 385 million bushels versus average pre-report trade estimates of 435 million bushels and the May USDA number of 415 million bushels. Estimates ranged for 390 million bushels to 700 million bushels. World stocks were raised slightly and that kept this market from taking off.
The USDA raised Brazil's soybean production estimates to 119 million metric tons (4.38 billion bushels) versus trade estimates of 117.5 million metric tons and USDA's May estimates of 117 million metric tons. CONAB raised Brazil's soybean crop 1 million metric tons to 118 million metric tons. The USDA lowered Argentina's soy crop to 37 million metric tons (1.36 billion bushels) which was slightly higher than pre-report estimates and lower than USDA's May forecast of 39 million metric tons.
Average trade estimates for 2018-19 world ending stocks were larger than expected. World ending stocks came in at 87 million metric tons versus pre-trade estimates of 86.3 million metric tons and slightly larger than USDA's May number of 86.7 million metric tons. The trade guesses ranged from 83.5 million metric tons to 91.3 million metric tons.
Informa Economics slightly raised its estimates for 2018 U.S. soybean acres, from 89.4 million acres last month to 89.9 million acres. In the second soybean crop condition ratings of the year on June 10, soybeans are at 74 percent good to excellent versus 75 percent last week. Average trade estimates were for 75 percent good to excellent ratings. The rest of the soybeans came in at 22 percent fair, and 4 percent poor to very poor. As of June 10, soybeans were 83 percent emerged versus 74 percent last year and 69 percent for the five-year average.
Canola July futures in Winnipeg were down $0.2 Canadia to $517.3 per metric ton Canadian. The Canadian dollar was lower to 0.7640. This brings the U.S. price to $17.93 per hundredweight.
• Velva, N.D., $17.83 per hundredweight, September at $16.72.
• Enderlin, N.D., $18.42 per hundredweight, September at $17.31.
• Hallock, Minn., $18.10 per hundredweight, September at $16.93.
• Fargo, N.D., $18.45 per hundredweight, September at $17.35.
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 June 10, Barley ratings are at 83 percent good to excellent, 16 percent good, and 1 percent poor to very poor. These ratings are above the 72 percent we saw last year.
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 $18.25, October at $18.75. For the week ending June 14, soybean oil was down 45 cents to $31.07 on the July contract.
As of June 10, sunflower plantings were at 72 percent nationally versus 77 percent planted last year and the five-year average of 60 percent planted.