Foreign policies driving markets
The wheat complex saw heavy losses early last week on news that Russia's foreign ag minister announced that they will not curb wheat exports despite lower yields experienced this year. The market actually performed OK, rebounding from 25 cent losses early and closing above the ever so critical 200-day moving averages. Matif Wheat futures were down 1.36 percent at $200.50 per metric ton for December on the Russian news and trended down to the $198.25 low from Aug. 28 over the next two sessions.
This followed a supportive Stats Canada report from Aug. 31 which led to 15 cent gains. Total Canadian wheat acreage increased 9.4 percent from 2017 to 24.3 million acres. Yields are expected to decline 11.5 percent from an average of 49.6 bushels per acre in 2017 to 43.9 bushels per acre in 2018. This puts wheat production at 29 million metric tons versus 30 million metric tons last year. Trade was expecting 30.6 million metric tons versus the U.S. Department of Agriculture's current estimate of 32.5 million metric tons. This was lower than the lowest trade guess at 29.3 million metric tons.
Follow-through selling came in the Sept. 5 session as rainfall across the Central Plains helped replenish soil moisture prior to winter wheat planting. This caused Chicago futures to close below the 200-day moving average and was the cause of much concern about further long liquidation. On Sept. 6, Stats Canada released its quarterly stocks report which held no surprises. All Canadian wheat stocks as of July 31 were 6.18 million metric tons versus expectations of 6.2 million metric tons compared to year-ago stocks of 6.835 million metric tons.
Weekly export inspections were on the lower end at 386,458 metric tons which added to negative sentiment early week. Weekly Commodity Futures Trading Commission data ending Aug. 28 showed the funds reducing their net long by 10,000 contracts to 51,000 net long. Spring wheat harvest is 87 percent complete versus 75 percent for the five-year average.
For the week ending Sept. 6, December contracts for Minneapolis wheat were down 27 cents at $5.7175, down 31.75 cents at $5.1375 for Chicago wheat, and down 36.5 cents at $5.1675 for Kansas City wheat.
The corn market traded in a very narrow range during the holiday-shortened week after posting gains going into the Labor Day weekend.
Weekly export inspections helped the bulls with 1.333 million metric tons (52.5 million bushels). Demand continues to be good, even though the final export tally for the year was 127 million bushels under USDA's estimate.
Weekly CFTC data showed the funds increasing their net short position by 42,000 contracts for the week ending Aug. 28. Funds are now net short 57,000 contracts. The market needs a close above the 50-day moving average of $3.695 December to lead to short covering.
The North American Free Trade Agreement continues to be the larger news item for the short term. According to an article from JP Morgan, Congress is very unlikely to ratify any agreement that does not include Canada because of bipartisan support favoring the agreement. President Donald Trump would need to submit an agreement to Congress by Oct. 1 for it to be reviewed and approved by Dec. 1. There is flexibility in any timetable, but, for the deal to be approved in a lame-duck Congress, time is ticking.
Argentina is expected to plant fewer corn acres as the government announced a 10 percent export tax on grains as part of a program to try to halt the devaluation of the Argentine peso. Cash markets have dried up in the country's interior river system with a lack of bids and asks as far out as April 2019.
Weekly ethanol production for the week ending Aug. 31 averaged 1.087 million barrels per day, totaling 7.609 million barrels. This is up 1.59 percent versus last week and up 2.55 percent versus last year. Stocks as of Aug. 31 were 22.703 million barrels and are running at record high levels on a same week comparison. This is down 1.55 percent versus last week and up 7.52 percent versus last year. Final production for 2017-18 will be 16.1 billion gallons versus 15.64 billion gallons in 2016-17. Cumulative corn usage will be plus or minus 5 million bushels at 5.61 billion bushels, slightly above USDA's official estimate of 5.6 billion bushels.
Weekly petroleum data showed crude oil stocks declining much more than expected at 401.49 million barrels. However, gasoline stocks posted a solid rise to 234.62 million barrels versus expectations of a modest decline. Distillate stocks rose much more than expected to 133.12 million barrels. Tropical Storm Gordon led to a 9 percent reduction in U.S. Gulf Coast oil and gas output, but port operators resumed normal operations this week as the storm downgraded before making landfall.
Another week and the same ol' story for soybeans — no deal with China in sight and most analysts are still expecting a large yield when harvest comes about. Soybeans should be getting some support from the flooding after heavy rains that have hit the Delta and the Midwest this past week, but the trade does not seem concerned. Time will tell where the yield actually is across the U.S. Soybeans are one of the hardest crops to estimate before the combines roll, so we will see if the wet spring and summer for parts of the Midwest that includes parts of Minnesota, Iowa and Wisconsin, and dry stretches for the lower Midwest will affect yields.
Analysts state that excess rains in the U.S. went from 20 percent to 40 percent, but weather is warm and dry for 10 days in most areas. Rains continue to fall in the western part of the Midwest, with some areas starting to see small flood concerns with rains ranging from 3 to 12 inches saturating fields. This may not hurt overall soybean yields too greatly, but fields do not dry out very quickly this time of year and could lead to quality issues.
China news (or lack there of) will continue to be the No. 1 factor on prices. The deadline is looming on the comment section for tariffs to China. Trump could slap an additional $200 billion on tariff's by Sept. 7 that will almost certainly see a Chinese retaliation. The large sticking point continues to be intellectual property and really is just two bulls locking horns and neither side breaking down.
South America is showing that they still have a long way to get their infrastructure and monetary policies up to par with more developed countries. Argentina's government announced it needed to increase export taxes on grains and oilseeds to raise revenue due to a devaluing peso. Brazil's transportation regulator raised minimum truck freight rates by 5 percent on average. This could cost the country's grain sector 3.4 billion reals ($818 million) and raise the cost of production this coming year.
With a lack of fundamental news until more farmers get into the field, the trade will likely look toward next week's monthly USDA report. Private estimates are being released ahead of the Sept. 12 report. Allendale puts 2018 U.S. soybean yields at 52.2 bushels per acre, versus USDA's 51.6 bushels per acre. FC Stone puts the 2018 soybean yield at 53.8 bushels per acre.
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 $8.62, the 50-day moving average of $8.705 and then the end of July's high of $9.2225. For the week ending Sept. 6, November soybeans were down 4.25 cents.
For the week ending Sept. 6, November canola futures in Winnipeg were up $2.70 at $498.30 Canadian per metric ton. The Canadian dollar was at .7579. This brings the U.S. price to $17.13 per hundredweight.
• Velva, N.D., $15.23 per hundredweight, October at $15.44.
• Enderlin, N.D., $16.16 per hundredweight, October at $16.16.
• Hallock, Minn., $15.81 per hundredweight, October at $15.98.
• Fargo, N.D., $16.05 per hundredweight, October at $16.25.
Cash feed barley bids in Minneapolis were at $2.60, while malting barley received no quote. Berthold, N.D., bid is $2.50 and CHS Southwest in New Salem, N.D., has no bid at the time.
Cash bids for milling quality durum are $4.80 in Berthold and at $4.85 in Dickinson, N.D.
Cash sunflower bids in Fargo for Sept. 15 delivery is at $17.30, and for October delivery at $17.30.
For the week ending Sept. 6, soybean oil was down 23 cents at $28.30 on the October contract.