Crops are testing contract lows
Wheat futures experienced very choppy trade this week reaching 200—day moving averages which provided a level of underlying support. Matif wheat futures traded to a five week low at $197.00 per metric ton September before recovering. Spring wheat harvest is at 77 percent compared to the five-year average of 61 percent.
Egypt purchased 290,000 metric tons of Russian wheat and 60,000 metric tons of Ukrainian wheat. The Russian ruble remains at the bottom end of its recent range. The Black Sea Region continues to dominate into the Egyptian market.
The International Grains Council trimmed its world wheat production forecast by 5 million metric tons to 716 million metric tons but they also reduced consumption by 5 million metric tons. France AgriMer stated that less than 50 percent of the wheat crop was 12 percent protein or higher compared to 75 percent of last year's crop. A report from Reuters stated that 40 percent of Ukrainian milling wheat is 12 percent protein or higher due to lower yields and rainfall that effected quality during harvest. Northern Ukraine fared worse with only 30 percent of wheat making milling quality.
IKAR lowered Russian overall grain crop estimates from 112.8 million metric tons to 110 million metric tons previously. Its wheat estimate was cut from 70.8 million metric tons to 69.6 million metric tons. There was also a report stating Ukrainian wheat production will be 25 million metric tons compared to 27 million metric tons last year.
A Farm Futures survey showed 2019 planting intentions increasing to 48.3 million all wheat acres, up 1 percent. Spring wheat was estimated at 12.9 million, down 2.5 percent while winter wheat surveys showed 48.3 million acres, up 2.6 percent.
The U.S. Department of Agriculture announced more specific plans regarding payments for commodities effected by trade retaliation. Wheat payments will be 14 cents per bushel. Producers with an adjusted gross income under $900,000 for tax years 2014-16 are eligible. Producers can apply after harvest is 100 percent complete and after September 4. The Market Facilitation Program will pay the producer 50 percent of the total. The remaining 50 percent of the producer's total 2018 actual production will be subject to the second MFP payment rate.
On Aug. 31, Canada will release its Production of Principle Crops report. Trade is currently expecting 30.6 million metric tons of Canadian wheat production versus USDA's current estimate of 32.5 million metric tons. Ag Canada has a current 30.3 million metric tons estimate.
Weekly export sales for all wheat were at the low end of trade expectations totaling 15.2 million bushels (414,800 metric tons) for the 2018-19 marketing year. Total shipments plus outstanding sales of 330 million bushels are 26 percent below the previous marketing year. Weekly shipments of 14.9 million bushels put total shipments 35 percent below the previous year.
For the week ending Aug. 30, September contracts for Minneapolis wheat were down 10.5 cents at $5.6225, down 6.75 cents at $5.08 for Chicago wheat, and down 7.0 cents at $5.1225 for Kansas City wheat.
Corn futures were lower as pressure from the wheat and soybean markets were too much to overcome. December corn is not far away from testing the contract lows set on July 12 of $3.5025. This fall could be a battle between lower global stocks and high U.S. production numbers. For the week ending Aug. 30, December futures were down 6.25 cents.
The U.S. and Mexico came to an agreement on Aug. 31 to overhaul the North American Free Trade Agreement. This provides hope that there can be an agreement between the three large trading partners on the books sooner than later. President Trump has put a tentative deadline of Aug. 31 to get an agreement done with Canada.
U.S. President Trump and outgoing Mexican President Enrique Pena Nieto said talks with Canada would begin immediately after this agreement. Trade negotiations have been very slow going between the three countries after Trump announced a year ago that he was going to rework the old NAFTA deal. A few of the most contentious issues is related to automobiles and dairy.
It will be interesting to see how the corn crop actually yields as the fast growth spurt corn saw this year and the majority of nights didn't cool down to give growth a break and could potentially affect yields. On the flip side we did not have many days of extreme heat this year in the Midwest to stress the crop. Did this year's crop have enough time to mature completely as we are 10 days ahead of schedule but didn't get the corn planted early? Either way the U.S. is going to see a large crop, just how large is still yet to be determined. A couple of bushels either way can make a big difference in prices.
As of Aug. 26, corn crop condition ratings were unchanged at 68 percent good to excellent. The rest of the crop is at 20 percent fair, and 12 percent poor to very poor. Average trade estimates were for unchanged conditions. Pro Ag's yield model was raised a bushel from last week and is closing in on USDA's 178.4 bushels per acre and slightly more than the 177.3 from the Pro Farmer tour. As of Aug. 26, Corn was 61 percent dented versus 42 percent last year and 42 percent for the five-year average. Corn mature was at 10 percent versus 5 percent last year and 5 percent for the five-year average.
The six to 10 and eight to 14 day outlooks are not doing prices any favors as they cooled the forecasts down across the Midwest and are starting to put moisture back in the forecasts.
Soybean futures flirted with contract lows this past week as ongoing pressure continues to come from expected large U.S. yields. August weather has been near perfect across the Midwest for this soybean crop. News on the trade front with China is non-existent as most of the focus is on renegotiating the NAFTA deal at the moment. November soybeans got within 3 cents of the contract lows we saw on July 16, which also happen to be 10-year lows. Soybean prices are at levels that should be desirable to the global community. Time will tell how much demand is out there in the global community for U.S. soybeans now that China is mostly out of the U.S. market place.
Due to the U.S.'s ongoing trade dispute with China, Argentina is exporting soyoil to China for the first time in three years. China usually imports soybeans to be crushed locally into soyoil and soymeal, but they are having trouble importing enough soybeans. But Argentina also has had to import soybeans for crushing from Brazil, Paraguay and the U.S. this year due to poor yields due to their drought.
Brazilian farmers are expected to increase their soybean acres 3 to 4 percent from last year, which could increase them to over 36 million hectares (89 million acres) for the 2018-19 production year. Farmers in Brazil start planting in mid-September. Inputs for Brazilian farmers are expected to increase due to a weak Brazilian Real and increasing freight costs for fertilizer, that is if they can find freight.
Details of the $12 billion Assistance for Farmers Impacted by Unjustified Retaliation can be found here: https://content.govdelivery.com/accounts/USDAOC/bulletins/208ff5c
For more information on the Market Facilitation Program, visit www.farmers.gov/mfp or contact your local Farm Services Agency office. Estimated Initial Payment for soybeans is $1.65 per bushel. This number is on 50 percent of 2018 production.
Soybean crop condition ratings on Aug. 26 were up 1 percent to 66 percent good to excellent. Pro Ag's yield model was raised a half bushel from last week and is now at 49.13 bushels per acre, 2.5 bushels less than the USDA is projecting and almost 4 bushels less than the Pro Farmer tour.
Major November soybean support is the contract lows set on July 16 of $8.2625. Nearby resistance is now the 20-day moving average of $8.78, the 50-day moving average of $8.77 and then the end of July's high of $9.2225. For the week ending Aug. 30, November soybeans were down 23.75 cents.
For the week ending Aug. 30, November canola futures in Winnipeg were down $2.10 at $495.00 per metric ton Canadian. The Canadian dollar was up .0020 to .7698. This brings the U.S. price to $17.29 per hundredweight.
• Velva, N.D., $15.28 per hundredweight, October at $15.49.
• Enderlin, N.D., $16.22 per hundredweight, October at $16.22.
• Hallock, Minn., $15.61 per hundredweight, October at $16.06.
• Fargo, N.D., $15.95 per hundredweight, October at $16.35.
Cash feed barley bids in Minneapolis were at $2.60, while malting barley received no quote. The Berthold, N.D., bid is $2.50 and the CHS Southwest New Salem, N.D., bid is $2.85.
Cash bids for milling quality durum are $4.80 in Berthold and at $4.85 in Dickinson.
Cash sunflower bids in Fargo were at $17.30, and October at $17.30. For the week ending Aug. 30, soybean oil was up 13 cents at $28.28 on the September contract.