Equity freefall concerns traders
Russian news and export numbers drove the market this week. Early week, it was announced that Russia will be holding an export meeting Dec. 21. There was speculation that Russia may curb exports as their supply diminishes because of the frantic pace they have been moving wheat this year. There was similar speculation a few months ago that this may happen at a similar meeting, but it did not.
Weekly export inspections were 682,000 metric tons (25.1 million bushels) which was well above trade expectations and provided additional buying support. Inspections for 2018-19 total 430.4 million bushels, down 15 percent from a year ago.
Midweek, the wheat complex experienced selling on news that the Russians are attempting to expand their footprint in world export market. SovEcon reported that Mexico purchased 900,000 metric tons of Black Sea Region wheat. Russia currently has around 7 percent of Mexico's wheat import business. SovEcon also reported that Russia was sending a wheat cargo to Saudi Arabia as a logistical test for future sales.
It's pretty sobering news that Russia is expanding wheat exports into Mexico. A number of analysts have been shocked at the Russian export pace thus far, so this announcement sheds some light that Russia was expanding wheat sales into markets the U.S. takes for granted.
Weekly export sales Dec. 20 were well below expectations coming in at 313,600 metric tons. Trade was expecting between 500,000 — 700,000 metric tons. This provided further selling pressure.
The charts in Minneapolis are at support levels. March Minneapolis had a low at $5.675 on Nov. 29. The contract low was $5.59 on July 12. Resistance is the Dec. 14 high of $5.895.
The U.S. dollar experienced pressure all week, trading from a high of $96.94 in Dec. 17 trade to $95.645 on Dec. 20. Matif wheat futures experienced losses this week as the Euro held the $113 level and could potentially be bottoming.
For the week ending Dec. 20, March contracts for Minneapolis wheat were down 16 cents at $5.68, down 6.5 cents at $5.235 for Chicago wheat, and down 8.75 cents at $5.095 for Kansas City wheat.
July corn futures have been flirting with the $4 mark since Dec. 5 trade. This week started out in the same fashion and again failed to close above $4. The $4 July resistance mark continues to attract farmer selling, along with speculative hedge and fund liquidation. The larger piece of information that traders were digesting this week in export reports was how much was China buying? In the end, the answer was not enough, even though export sales were very good. The sideways trading range of $3.80 to $3.8775 since Dec. 3 broke to the downside in Dec. 20 trade, as traders took profit into the holiday weekend.
Commodity Futures Trading Commission data ending Dec. 11 showed the funds increasing their net corn long by 45,000 contracts to 99,000 net long. This was a larger long than the trade was expecting and gave further pause to buyers early week.
Weekly export inspections were at the lower end of trade expectations coming in at 885,000 metric tons (34.8 million bushels). This is still not a bad number as last year for this week was 25.1 million bushels. Weekly export sales were very impressive at 1.974 million metric tons. Total commitments of 1.166 billion bushels in 2018-19 are up 17 percent from a year ago.
The Black Sea Region gets a lot of attention on exporting wheat, but on Dec. 19 Ukraine announced that its corn exports are set to nearly double last year's from 4.4 million metric tons to 7.5 million metric tons. This also gave sellers the edge.
Weekly ethanol production was 7.322 million barrels, unchanged from last week and down 2.88 percent from last year. Stocks as of Dec. 14 were 23.873 million barrels, up 4.29 percent versus last week and up 6.96 percent versus last year. Ethanol profit margin with Iowa prices is in the negative 60 cent per gallon range.
Some thoughts on the corn market as we move into the holiday weekend (both pro and con). Demand with export sales continues to move at a much higher pace than last year. Higher fertilizer prices may not lead to the 2019 acreage increase that some are anticipating. High carryout in soybeans puts a lid on that market with corn as collateral damage. Negative ethanol margins due to higher natural gas prices and higher corn prices with improved basis could lead to curtailed production. The huge drop in crude oil prices could lead to lower sales of higher ethanol blends, although cheaper gasoline could lead to overall more sales of E-10.
Each of the above statements have merit, but for now, look for the most direction to come from South American weather. Rains are forecast for dry areas of central Brazil over the weekend. A hit or a miss will give buyers or sellers the edge during Christmas week.
Soybean futures were lower this week as traders seemed disappointed with the amount of soybeans that were confirmed from Chinese purchases. News of a follow up sale to China did not impress the trade as January soybeans pushed back down below $9. USDA announced that 44.1 million bushels (1.2 million metric tons) of U.S. soybeans were sold to China for 2018-19, but the trade was obviously hoping for more. Options expired Friday which also caused pressure as the largest amount of open interest was at $9 strike price.
Forecasts are switching to more favorable for South American farmers as southern Brazil has a better forecast for beneficial rains this coming week and Argentina's rainfalls are not expected to be as extreme, which decreases their flooding risk. Areas in Paraná and Mato Grosso do Sul, two of the five largest Brazilian producing states, have not seen a drop of rain for 20 days according to a statement from weather forecasting firm Rural Clima. South American weather is something to watch for the next month as it will be the leader for price movement.
President Donald Trump authorized the second round of the Market Facilitation Payments late on Dec. 17. Farmers will now get paid the whole $1.65 payment for soybeans for their 2018 production. Producers need only to sign up once for the market facilitation program to be eligible for the first and second payments. For farmers who have already applied, completed harvest, and certified their 2018 production, a second payment will be issued on the remaining 50 percent of the producer's total production. Farmers need to sign up by Jan. 15. The farm bill also passed this week with few changes from the last farm bill.
The stock market did not take too kindly to the Fed raising interest rates this week and stating that they expect two more interest rate hikes next year. The Dow and Nasdaq were already under pressure ahead of this expected rate hike, but they are now on pace for the worst December since 1936. The Dow has fallen back to a 14-month low. A battle in Congress to prevent a government shutdown was also putting pressure on the markets.
For the week ending Dec. 6, weekly export shipments of 42.1 million bushels puts total shipments down 41 percent from a year ago. Weekly export sales were a year high 104.2 million bushels for the 2018-19 marketing year and 4.7 million bushels for the 19-20 marketing year. Total commitments for 2018-19 are at 1.012 billion bushels and down 30 percent from a year ago.
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. 18t of $8.1225. January soybean resistance is the three-month high set Oct. 15 of $9.0625 on the January contract and then major resistance is the end of July's high of $9.3275. January soybeans were down 7 cents for the week.
For the week ending Dec. 20, January Canola futures were down $0.40 at $477.40 Canadian per metric ton. The Canadian dollar was at 0.7418. This brings the U.S. price to $16.07 per hundredweight.
• Velva, N.D., $15.71 per hundredweight, January at $15.64.
• Enderlin, N.D., $17.05 (Nexera).
• Hallock, Minn., $15.79 per hundredweight, January at $15.96.
• Fargo, N.D., $16.75 per hundredweight, January at $16.65.
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, N.D., 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. 20, soybean oil was down 29 cents at $28.20 on the January contract.