Markets awaiting trade negotiation details
The wheat market experienced a couple of days with decent gains during regular trade only to close with minor gains in an overall sideways pattern this week. All three wheat contracts ran up to their 50-day moving averages but failed to punch through them. This led to more technical selling in the Jan. 10 session.
Weekly export inspections were well below expectations coming in at 260,000 metric tons (9.6 million bushels). This was the lowest weekly total of the marketing year, which gave the market pause early week.
The U.S. dollar had a lower tone this week and has been off $1.60 since the Jan. 3 session, which should be supportive to exports. There is a lot of export activity lately. Algeria purchased 550,000 metric tons of wheat at $261 per metric ton, with the likely suppliers being France and Argentina. Tunisia tendered for 100,000 metric tons of durum. Egypt purchased 415,000 metric tons from Russia for shipment in late February and early March. There were nine offers and Russia was the low bidder. The U.S. offer was only 60 cents per metric ton higher than the Russian offer on a shipped basis. So U.S. prices are competitive — it's just the higher cost of shipment across the Atlantic that is giving the Black Sea region the edge.
Matif (French) wheat futures have been trading in a range of $203 to $207 per metric ton recently, and the euro has been sideways to higher, holding $113.70 levels, which should hurt European exports in the second half of the marketing year. France did announce this week that they would be trimming their export forecast outside of Europe in the coming year. The other good news from a currency exchange standpoint is that the Canadian dollar has increased more than $2 since Dec. 31, which should help U.S. spring wheat export business. This increase is certainly aiding U.S. canola prices.
The Jan. 11 crop report will be delayed because of the government shutdown, so it's harder to determine market direction. The tender announcements are serving as the best indicator for market movement. A couple of private analysts are stating that the U.S. Department of Agriculture will likely increase the Russian production number by 1 million to 2 million metric tons but that Australia could be revised down by 1 million metric tons. Once the U.S. government opens, there will be a lot of export data hitting the market all at once, since the last export sales report was Dec. 20. We could see some unusual volatility for this time of year — good or bad, but I think the recent weakness in the U.S. dollar would cushion the downside in regard to the wheat market.
Average trade guesses for the January crop report show 32.27 million acres of fall planted wheat versus 32.53 million last year. This average guess is some 700,000 acres higher than Informa's estimate from earlier this week. U.S. and world ending stocks number estimates for 2018-19 are very close to December final numbers at 987 million bushels and 268.22 million metric tons.
Informa estimates fall winter wheat seedings at 31.513 million acres, a decrease of more than 1 million from last year. Of this 31.513 total, 22.2 million is Kansas City hard red winter, 5.85 million is Chicago soft red and 3.46 million is white wheat.
For the week ending Jan. 10, March contracts for Minneapolis wheat were down 6.25 cents at $5.64, down 3.25 cents at $5.1375 for Chicago wheat, and down 7.25 cents at $4.9875 for Kansas City wheat.
Corn futures continue to be range-bound with both the bulls and the bears looking for news to push the market one way or the other. In Jan. 8 trade, the July contract hit $3.995 before backing off. We saw the July contract hit $4.0125 in mid-December, and there appears to be an enormous amount of hedge and speculative selling interest once this contract gets around $4.
Weekly inspections came in at 502,000 metric tons (19.7 million bushels), which was well below expectations of 650,000 metric tons to 1 million metric tons. This was the lowest total of the marketing year.
Conab estimates the Brazil corn crop at 91.2 million metric tons, compared to 91.1 million metric tons last month and USDA's estimate of 94.5 million metric tons. The Rosario Exchange estimates the Argentina corn crop at 44 million metric tons versus earlier estimates of 42 million to 43 million metric tons and USDA's current estimate of 42.5 million metric tons. These numbers compare to the average trade guesses of 94.31 million metric tons for Brazil and 42.39 million metric tons for Argentina.
Weekly ethanol production was 7 million barrels, a 37-week low. This is down 1.09 percent versus last week and up 0.4 percent versus last year. This is a 2.6 percent decrease in over the last eight weeks compared to last year. Ethanol stocks as of Jan. 4 were 23.254 million barrels, up 0.4 percent versus last week and up 2.35 percent versus last year. Ethanol stocks, despite the production slowdown, remain at record levels for this time of the year. With the slowdown in production, a 1.7 percent gain is needed through Aug. 31, and it's unlikely that the USDA estimate of 5.6 billion bushels of corn for ethanol will be met for the marketing year.
Weekly petroleum data showed crude oil stocks declining less than expected to 439.74 million barrels. Gasoline stocks rose significantly more than expected to 248.06 million barrels and distillate stocks rose significantly more than expected to 140.04 million barrels. For the corn marketing year, year-over-year gasoline demand is running 1.2 percent less than the same period last year. Spread prices for E85 under E10 remain historically narrow at 27 cents per gallon in the Fargo, N.D., market.
Crude oil futures have rebounded more than $10 per barrel since Christmas Eve. Saudi Arabia stated earlier this week that they will be cutting back on production in an attempt to boost global prices.
Soybean futures were under pressure and took a big hit on Jan. 10, as Conab estimates came in lower than last month but were much larger than trade expectations. Conab is putting Brazil's soybean crop at 118.8 million metric tons (4.366 million bushels), down from 120.1 million metric tons last month and 119.3 million metric tons last year. This was above the average trade estimate of 117 million metric tons. These estimates are also much larger than private estimates we have seen recently. AgRural lowered Brazil's soybean crop estimate from 121.4 million metric tons to 116.9 million metric tons (4.295 billion bushels) due to recent heat and dryness in southern Brazil. Private analyst Cordonnier cut Brazil's soybean crop 3 million metric tons to 116 million metric tons.
Trade negotiators from China and the U.S. have narrowed some of their differences, according to sources, which makes negotiations between senior negotiators later in the month much more likely. U.S. ending stocks are still burdensome. Even if there is a future agreement between the U.S. and China, it will take a long time to eat through the abundant soybean stocks.
The weekly export inspections report was disappointing this week and may have kept the upside limited. Soybean weekly export inspections totaled 24.7 million bushels for the week ending Jan. 3, down from 44.6 million bushels for the same week a year ago. Inspections for 2018-19 total 635.6 million bushels, down 42 percent from a year ago and far below USDA's estimate for an 11 percent reduction. USDA export sales data will be delayed until the government is back up and running in full capacity.
Current support for the March contract is $8.77. Resistance is $9.1825 and then the five-month high of $9.4175. March soybeans got within 15 cents of this major resistance point before falling off. March soybeans were down 14.75 cents for the week ending Jan. 10.
For the week ending Jan. 10, March canola futures were down $4.90 at $480.50 Canadian per metric ton. The Canadian dollar was at 0.75605. This brings the U.S. price to $16.48 per hundredweight.
• Velva, N.D., $16.26 per hundredweight, March at $15.99.
• Enderlin, N.D., $17.46 (Nexera).
• Hallock, Minn., $16.26 per hundredweight, March at $16.33.
• Fargo, N.D., $16.75 per hundredweight, March at $16.80.
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 $17, with March bids at $17.35.
For the week ending Jan. 10, soybean oil was down 45 cents for the week at $28.19 on the March contract.