Can we really believe the numbers from China?
The wheat market traded choppy to sideways this week as numerous news items gave the bull camp and the bear camp ammunition.
Minneapolis December touched and backed off of $5.89 for the third time in the last two weeks but did manage to maintain $5.80. The Chicago and Kansas City markets acted in similar fashion with $5.10 to $5.13. December resistance levels are holding firm but psychological support at the $5 levels are holding in Chicago.
Russia's deputy ag minister reduced Russia's all grain export prediction from 38 million to 39 million metric tons to 35 million metric tons. A vast majority of this overall number is wheat. So roughly 32 million metric tons would be the wheat number. Current Russian exports for all grains are at 21.6 million metric tons, with wheat comprising 18 million metric tons. From these numbers alone, one would expect a slowdown in Russian exports for the second half of the season. However, another Russian official recanted this statement, saying that total exports would remain at 39 million metric tons with the wheat target at 35 million metric tons.
If the Russian disinformation wasn't enough drama for the week, along came the Chinese. The monthly World Agricultural Supply and Demand Estimates report showed a large upward revision to world ending stocks. Global stocks increased 6.5 million metric tons to 266.71 million metric tons versus the average trade guess of 259.3 million metric tons and 260.2 million metric tons in the October report. The vast majority of this change was from significant revisions to Chinese wheat production for the years 2007-08 through 2017-18. Without the Chinese revision, world stocks outside of China would have decreased 0.9 million metric tons, mostly from reductions in Australia's drought stricken crop.
The 2018-19 U.S. carryover stocks were reduced slightly to 949 million bushels versus expectations of 958 million bushels compared to 956 million bushels in the October report. U.S. farm gate prices are expected to be between $4.90 and $5.30 per bushel.
Weekly export sales totaled 661,200 metric tons (24.3 million bushels). This was above market expectations and the best number in six weeks. Total commitments of 506 million bushels are down 16 percent from a year ago. Weekly inspections totaled 12 million bushels for the week ending Nov. 1, which was slightly below expectations. Marketing year inspections total 329 million bushels, 22 percent lower than last year and well below USDA's projected 14 percent increase.
There is one question on the farmers' minds for the U.S. Department of Agriculture: Are you really going to play China's game in the middle of a trade war?
A day ahead of the USDA report, China magically found an extra 149 million metric tons (5.865 billion bushels!) of corn after they revised their data from the last 10 years. Really, China? Chalk it up to Chinese accounting methods? Sounds kind of convenient that this happens during the middle of a trade war, doesn't it? They have had technical difficulties releasing their reports since the start of trade tensions, and then come out with this bombshell. The USDA decided to take China's numbers and run with them, basically doubling world ending stocks for corn from last month.
In the October report, the USDA had world ending stocks at 159.4 million metric tons. On Nov. 8, they came out with 307.45 million metric tons, all but 1 million metric tons of this increase was Chinese stocks. China feeds almost all of their corn and soon will be turning some of their corn into ethanol domestically. The U.S. has hardly ever exported any corn to them in the past anyway, so why should their drastic increase affect our markets?
China is not a major exporter. They are not even in the top 35 countries globally if you go by 2017 corn exports by dollar amount. China also doesn't import more than 5 million metric tons of corn per year total, most of which comes from Ukraine (which saw a record crop of 33.5 million metric tons this year). So in all reality, why should China's corn numbers matter much?
If the trade is smart, they will focus their attention to U.S., South America and Ukraine corn numbers. It may take a couple days for the trade to digest this China stocks number and decide if they believe it or not, or if they even care. Without including China's ending stocks, there is 100 million metric tons of global ending stocks in the world, which would be down from 100.85 million metric tons last month. This would also be 16 percent lower from a year ago. It looks like communist China is just trying to be a bully.
U.S. numbers were much more favorable as they lowered yields to 178.9 bushels per acre, down 1.8 bushels from the 180.7 bushels per acre in October. This is less than the 180 bushels per acre that was expected. They also lowered U.S. ending stocks 77 million bushels to 1.736 billion bushels for the 2018-19 marketing year.
The USDA puts 2018 production at 14.626 billion bushels, down 152 million bushels from last month and below trade expectations. This would still be a record yield and the second largest production number in history. They kept harvested acres the same at 81.8 million acres.
The USDA lowered feed use again despite record hog numbers. Their reasoning is a smaller crop (still near a record) and higher prices (???). They also lowered exports 25 million bushels due to increased competition from Ukraine, even though export sales commitments are up 16 percent from a year ago and export inspections are up 85 percent from last year at this time.
The USDA is losing accountability with a lot of farmers this year as they drastically raised stocks in the middle of the summer and then back pedal when the actual harvest numbers started to come in. This is a repeat of what they did with soybeans last year and what they are starting to do again this year. All this does is lower prices prematurely during the summer and then they try to fix it after the damage is done and after many farmers already had to sell their crop at harvest.
Resistance is $3.79, which we hit right after the Nov. 8 USDA report, which is a half-cent higher than the two-month high set on Oct. 15 of $3.785. Major resistance is then the four-month highs of $3.885.
Support for December corn is the month low of $3.625 and then is the contract low of $3.4245 set Sept. 18. Within 30 minutes of the USDA report release, corn bounced up to 10-week highs before bouncing down within a penny of the week's lows but ultimately closed with a positive number. Corn was up 2.25 cents for the week ending Oct. 8.
Soybean futures were under slight pressure this week in anticipation of a higher U.S. ending stocks number, and that is exactly what we got from the USDA report. Soybean futures dropped nearly 18 cents shortly after the USDA release, but fought their way back to close near unchanged for the day. Soybean yields did come in lower than expected, which helped keep soybean futures afloat. The USDA has soybean yields at 52.1 bushels per acre, 1 bushel lower than the October report yield of 53.1 bushels per acre. It was not a friendly overall report for soybeans as ending stocks continue to rise. It is no secret that this is largely due to the trade spat with China.
Exports were reduced by 160 million bushels, which was more than expected. From the November WASDE report, "The forecast protein consumption growth rate for China is reduced, which is reflected in the limited number of U.S. export sales this fall. Although sales to China are minimal, strong sales to other markets are expected to continue, which is likely to result in a larger share of U.S. exports in the second half of the marketing year."
Production was reduced to 4.599 billion bushels versus pre-report estimates of 4.676 billion bushels and 91 million bushels less than the 4.690 billion bushels in the October report. Ending stock numbers for 2018-19 are expected to be 955 million bushels, 70 million bushels more than the 885 million bushels in the October report. This was 55 million bushels larger than pre-report estimates. World stocks for 2018-19 were raised 2.1 million metric tons from the October report to 112.1 million metric tons and larger than the pre-report estimates of 110.8 million metric tons.
The USDA kept harvested acres the same at 88.3 million acres. This could get lowered as 17 percent of soybeans were still waiting to be harvested in the U.S. as of Nov. 4, which was 6 percent behind average. Harvest is once again slowed by rains and snows across the Midwest. Weather has been favorable in Brazil as Ag Rural puts Brazil soybeans at 60 percent planted as of the first weekend in November versus 43 percent last year and 41 percent for the average. The crop planted so far is planted into good moisture and is off to a good start.
November soybeans support is the summer lows set July 16 of $8.2625 and then the new 10-year lows set on Sept. 18 of $8.1225. The psychological $8 mark and then $7.7625 lows set back in December 2008 are major support after that. Resistance is the new 1.5 month high set Oct. 15th of $8.92, and then major resistance is the end of July's high of $9.2225. The 2018 Soybean Harvest Price Insurance Guarantee is set at $8.60. For the week ending Nov. 8, November soybeans were down 7.75 cents.
For the week ending Nov. 8, January canola futures were down $7.10 at $481.80 Canadian per metric ton. The Canadian dollar was down 0.0035 to 0.7604. This brings the U.S. price to $16.62 per hundredweight.
• Velva, N.D., $15.73 per hundredweight, December at $15.73.
• Enderlin, N.D., $17.21 per hundredweight, Nexera.
• Hallock, Minn., $16.10 per hundredweight, December at $16.16.
• Fargo, N.D., $16.80 per hundredweight, December at $16.20.
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 New Salem, N.D., bid is $2.55.
Cash bids for milling quality durum are $4.50 in Berthold and at $4.50 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $16.70, with December bids at $16.80.
For the week ending Nov. 8, soybean oil was down 20 cents at $28.02 on the December contract.