Uncertainties cause range-bound trading
The wheat market struggled early week with Russia showing a 13.5 percent increase in Russian export activity for the first half of the marketing year versus the same period last year. Customs data showed 24.3 million metric tons of wheat exported.
Additionally, Russia's ag ministry forecast 42 million metric tons in exports for the marketing year. Russian wheat prices stayed steady last week after increasing $3 per metric ton the previous week.
There have been rumors that Russia will start to curb exports. These rumors have been ongoing but we are starting to see a slowdown in Russian corn exports from a report released Jan. 15.
The Black Sea Region is also trying to balance robust demand with shipping logistics. Freight rates are increasing, as shipowners are considering moving vessels away from the region because they can't get spot supplies quickly and are losing money having to wait. This is likely the reason Russia announced a few weeks ago a subsidy program to get internal wheat to its ports quicker.
Weekly export inspections were 546,000 metric tons (20.1 million bushels) which was well above trade expectations of 250,000 — 400,000 metric tons. European Union soft wheat exports are down 26 percent from a year ago at 8.57 million metric tons. This marks the fourth straight year of a European decline onto the world market.
Adequate snow cover and a mild winter through much of the former Soviet Union has traders less concerned about Black Sea Region production in the upcoming year. U.S. snowfall coverage maps show 4-8 inches of snow cover over most of Kansas stretching through eastern Ohio. This is favorable for crop protection as both the six-to-10 and eight-to-14 day forecasts show much below normal temperatures through the center of the country. The areas that look to be the most susceptible to the coming cold temperatures are eastern Colorado, Oklahoma and northern Texas.
Australia is experiencing some scorching hot record temperatures. Parts of western Australia and New South Wales in the southeast had 91 degree lows overnight on Jan. 15 and hit 113 degree highs on Jan. 16. Although this is not the growing season, Australia fought a devastating drought last summer, and it is in the back of traders minds. This weather pattern looks to persist for two weeks.
Average trade guesses for the January crop report show 32.27 million acres of U.S. fall planted wheat versus 32.53 million last year. 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.
For the week ending Jan. 17, March contracts for Minneapolis wheat were up 2 cents at $5.72, down 1.75 cents at $5.1775 for Chicago wheat, and down 0.5 cents at $5.04 for Kansas City wheat.
Corn futures can't decide what direction they want to head as positive news is not lifting this market up as should be expected. Souring talk about China may be causing headwinds for the corn complex more than was originally thought. The U.S. and China are not expected to talk again until Jan. 30, later than what was expected.
The U.S. government partial shutdown is closing in on lasting one month. There have been no real known negotiations between the two sides for more than a week, and it seems both sides are digging in for the long haul. A lack of U.S. Department of Agriculture reporting is also causing frustration among traders with bullish positions. Some funds may be liquidating their positions until there is news and numbers they can trade. March corn was down 1.75 cents for the week ending Jan. 17.
Export pace remains very good, and keep in mind last year our corn exports picked up from February to August as a result of the poorer South American crop. It is more likely that if South American production is average, that U.S. corn export pace will slow down from this brisk pace we have been experiencing. Global competition is heating up as Ukrainian consultants estimate that the country's corn exports for 2018-19 could top 1 billion bushels, almost 44 percent higher from the year prior due to last year's record crop.
Safrina corn planting is just starting in parts of northern Brazil, but much of it is getting planted into drier than ideal conditions.
South American weather forecasts are much drier today in central Brazil for the eight-to-14-day forecast. The entire 14-day period is below average precipitation for central Brazil, and that will do further damage to crops there and reduce crop projections unless the pattern reverses.
This is good news for soybean prices, where there already is a huge surplus with U.S. carryout levels at 955 million bushels. Recent temperatures are normal to below normal in the northern Brazil and Argentine production areas and above normal in the dry central Brazil region and are forecast to last the entire 14 days (with a bit more heat at the end of the 14 days). So this will be bullish and support soybeans to have less rainfall in the eight-to-14-day forecast for central Brazil.
Average trade guesses for the January crop report that is delayed indefinitely are 94.31 million metric tons for Brazil and 42.39 million metric tons for Argentina. These are both slightly lower than the November report numbers of 94.5 million metric tons and 42.5 million metric tons. U.S. production average trade guess is 178 bushels per acre and 14.538 billion bushels, down slightly from the November report. U.S. ending stocks average trade guess for 2018-19 is 1.694 billion bushels, compared to 1.781 billion bushels in the December report. World ending stocks numbers for 2018-19 are estimated at 307.32 million metric tons.
Soybean futures were choppy this week with double digit moves in both directions happening within a couple days of each other.
Much of Brazil is experiencing hot, dry weather with a few rains in the five-day forecast. Rains are not expected to offer a lot of relief though, but they may cool off temperatures a bit in central Brazil.
Uncertainty with how trade negotiations are proceeding is also causing a lot of volatility in the soybean complex. U.S. and China trade negotiations are expected to resume on Jan. 30. If no agreement is reached, the March 1 deadline to end the tariff ceasefire will be getting too close for comfort.
National Oilseed Processors Association soybean crush number of 171.759 million bushels was the most ever for the month of December and the third highest crush on record. NOPA December soybean crush was higher than expected, and NOPA December soybean oil stocks came in lower than expected.
News from South America and China trade negotiations are the primary market drivers at the moment. U.S. ending stocks and other fundamental numbers have taken a back seat as there are no USDA reports to trade. The large ending stocks number continues to be the elephant in the room that continues to keep a cap on prices. With the current government shutdown, the January USDA monthly report that was due out on Jan. 11 will likely be delayed until the end of the month, or later.
Brazil shipped a record 84 million metric tons of the oilseeds in 2018. Brazil crop roundup has their soybean estimate at 116 million to 117 million metric tons (USDA 122 million metric tons). Brazilian ag consultancy firm SAFRAS lowered Brazil soybean crop estimates to 115.7 million metric tons. This compares to AgroConsult at 117.6 million metric tons and CONAB at 118.8 million metric tons.
Brazil soy harvest is estimated at 3 percent complete and is expected to be 6 percent by end of week. Early yields are disappointing so far. Argentine crop roundup has their soybean estimate at 55 million metric tons (USDA 55.5 million metric tons).
Current support for the March contract is $8.77. Resistance is $9.1825 and then the five-month high of $9.4175. March soybeans were down 2.5 cents for the week ending Jan. 17.
For the week ending Jan. 17, March canola futures were down 10 cents to $483.20 Canadian per metric ton. The February Canadian dollar was down .0001 at 0.7541. This brings the U.S. price to $16.53 hundredweight.
• Velva, N.D., $16.37 per hundredweight, February at $16.37.
• Enderlin, N.D. $16.92 per hundredweight, February at $16.92.
• Hallock, Minn., $16.30 per hundredweight, February at $16.33.
• Fargo, N.D., $16.75 per hundredweight, February at $16.85.
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 $4.60 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17, with February at $17.25.
For the week ending Jan. 17, soybean oil was up 60 cents at $28.77 on the March contract.