Trade still skeptical of China
The wheat complex had a good week of price movement due mostly to improved export sales numbers and increased prices from the Black Sea region. The U.S. dollar ran right up to $97.50 resistance but backed off in Dec. 11 trade. Matif Wheat futures also had a solid week, reaching $208 per metric ton on the March contract. The euro stayed in a sideways range of $113.60 to $114.35 for most of the week.
Russian export prices rose $3 per metric ton last week according to Moscow-based agriculture consultancy IKAR. This was due to high demand from Egypt. Egypt's state-buyer GASC purchased 120,000 metric tons of Russian wheat and 60,000 metric tons of Romania wheat for February shipment with prices between $256.37 and $259.15 per metric ton.
The World Agricultural Supply and Demand Estimates report adjusted the U.S. wheat balance sheet by lowering total export projections by 25 million bushels. Given the current pace of exports this adjustment made sense. If you break down the export adjustments further, Kansas City hard red winter wheat was lowered 40 million bushels to 320 million bushels, while Chicago soft red was raised 10 million bushels to 130 million bushels and Minneapolis hard red spring wheat was raised 5 million bushels to 300 million bushels. U.S. all wheat ending stocks for 2018-19 are estimated at 974 million bushels, up from 949 million bushels in the November report.
World ending stocks for 2018-19 are estimated at 268.1 million metric tons compared to 266.71 million metric tons in the November report. The U.S. Department of Agriculture lowered Australian production by 500,000 metric tons to 17 million metric tons but raised Canadian production by 300,000 metric tons to 31.8 million metric tons. World export estimates were increased 1.5 million metric tons from Russia but lowered by 1 million metric tons for each Australia and the European Union.
The market moved higher in Dec. 13 trade as weekly exports were the second highest of the year coming in at 754,100 metric tons (27.7 million bushels). This was at the top end of trade estimates. Total commitments of 601 million bushels are down 10 percent from a year ago. Weekly export inspections were 419,100 metric tons (15.4 million bushels).
Argentina's wheat crop is 45 percent harvested, and they are projecting a yield of 19.2 million metric tons compared to USDA's current estimate of 19.5 million metric tons.
Support for March Minneapolis is $5.685 with resistance at $5.93.
For the week ending Dec. 13, March contracts for Minneapolis wheat were up 6.75 cents at $5.8825, up 4.75 cents at $5.36 for Chicago wheat, and up 8 cents at $5.20 for Kansas City wheat.
Corn futures are stagnant but still continue to trend up very slowly as futures trend near the upper end of their trading range and try to test resistance levels. Resistance levels for corn that were set later in the fall during harvest are $3.905 for March and $4.0325 for July. There were not many surprises in the Dec. 11 USDA report, and the lack of market movement verified that. The December USDA monthly report is typically not a price mover, and this year was a prime example of that. The January report is when the USDA will evaluate this past harvest and make major adjustments accordingly.
The USDA kept production unchanged at 14.626 billion bushels. 2018-19 U.S. ending stocks were raised 45 million bushels from the November report and are estimated at 1.781 billion bushels. Pre-report average estimates were at 1.738 billion bushels. The USDA kept exports unchanged. Exports have been very strong, so the thought is they will make some more adjustments in the January report. Ethanol use was lowered 50 million bushels. Brazil's production was kept unchanged at 94.5 million metric tons. World stocks were raised 1.29 million metric tons from the November report to 308.8 million metric tons for the 2018-19 year due to higher production in Ukraine and the European Union.
Early in the week, the USDA announced 64.8 million bushels (1,645,920 metric tons) of U.S. corn was sold to Mexico, 43.5 million bushels for 2018-19 and the rest for 2019-20. This is one of the larger single day sales to Mexico in recent memory, but this announcement did not have the desired effect for the bull hopefuls to break futures through resistance levels. Inspections for 2018-19 total 521 million bushels in 2018-19, up 76 percent from a year ago. Total commitments of 1.088 billion bushels in 2018-19 are up 16 percent from a year ago.
Ethanol production is down 3.95 percent from last year at this time and is under continued pressure as ethanol margins are shrinking. Ethanol stocks are up 2.31 percent from last year. Corn use was 108 million bushels this past week. Corn use needs to average 107.304 million bushels per week to meet the USDA estimate of 5.6 billion bushels.
Resistance for March is at $3.905 and then the six-month high set the beginning of August at $3.9875. Support for March corn is the Nov. 26 lows of $3.6725 and then the lows of $3.5475 set mid-September.
Soybean futures saw a choppy trade this week as rumors started flying about some reported sales, and China was finally involved. January soybeans got within 5 cents of the July 31 highs of $9.3275, which is major resistance, but could not find any follow-through buying as the week progressed. The USDA is kicking the can down the road to the January report. This is not uncommon as the January report is usually the main report for updates for the most previous harvest. On the South American side, Brazil's production was raised 1.5 million metric tons to 122 million metric tons and Argentina production was unchanged at 55.5 million metric tons.
There was a good amount of positive news to hit the wire on Wednesday after the USDA kept U.S. soybean numbers unchanged across the board. Prices did not mirror the positive export news as some of these small Chinese purchases were expected and likely priced in the market already.
An early morning announcement on Dec. 12 from the USDA that 4.8 million bushels (130,682 metric tons) of U.S. soybeans were sold to Mexico and another 4 million bushels (110,000 metric tons) sold to unknown destinations for 2018-19 helped give this market support. Reuters then reported that Chinese state-owned companies bought at least 500,000 tons (18.4 million bushels) of U.S. soybeans on Dec. 12.
Private reports on Dec. 13 stated that there were more purchases than just the 500,000 metric tons reported, and purchases were actually 1.13 million metric tons (41.5 million bushels) for delivery to China and possibly more that have not been reported yet. Early in the week Bloomberg reported that the People's Republic of China State Council will make a decision soon to purchase 5 million to 8 million metric tons of U.S. soy with another 2 million metric tons available to commercial users with 25 percent tariff rebated. Hopefully the sales this week is the first of many in the near future. Inspections for 2018-19 total 484 million bushels, down 42 percent from a year ago and far below USDA's estimate for an 11 percent reduction. Total commitments of 916 million bushels in 2018-19 are down 34 percent from a year ago.
Farmers are getting held hostage on making decisions for future soybean sales as the USDA kicked the can down the road regarding the second half of the $1.65 soybean payment. The USDA was supposed to make a decision by Dec. 7, but officials are now delaying their decision until possibly the end of the year due to progress in talks with China. On Tuesday, USDA spokesman Tim Murtaugh said in a statement that "We are in discussions with the White House and anticipate that the second payment rates for the Market Facilitation Program will be published before the end of the year." As of Dec. 10, the USDA has paid just over $2 billion under the Market Facilitation Program.
November soybeans support is the month lows of $8.57, then the summer lows set July 16 of $8.2625 and then the new 10-year lows set on Sept.18 of $8.1225. January soybeans broke through the three-month high set Oct. 15 of $9.0625 on the January contract and now major resistance is the end of July's high of $9.3275. January soybeans were down 9.75 cents for the week.
For the week ending Dec. 13, January canola futures were down $2.60 per metric ton at $482.90 Canadian. The Canadian dollar was down .0039 to .7492. This brings the U.S. price to $16.41 per hundredweight.
• Velva, N.D., $15.92 per hundredweight, January at $15.82.
• Enderlin, N.D., $16.72 per hundredweight, January at $16.72.
• Hallock, Minn., $16.20 per hundredweight, January at $16.27.
• Fargo, N.D., $16.75 per hundredweight, January at $16.65.
The Canadian dollar reached a new contract low in Dec. 6 trade of $74.39.
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 $16.90, with January bids at $17.15.
For the week ending Dec. 13, soybean oil was down 5 cents at $28.64 on the December contract.