Only rumors available to move trade
The wheat market experienced buying interest to kick off the holiday shortened week. The big market mover was rumors of China potentially purchasing 7 million metric tons of U.S. wheat. Keep in mind that 8 million metric tons is just under 300 million bushels, or three-fourths of the total U.S. spring wheat crop. The current cold snap gripping the U.S. and fears of winterkill across the Southern Plains also provided underlying support.
The second big piece of information from the three-day weekend was that Russian wheat prices increased and their internal milling margins have narrowed due to declining supplies from the rapid export pace. Russian wheat prices are at four-year highs. There was a report that the Russian ag ministry decided to regulate grain prices by using rail subsidies from the interior of the country. Last month, trade had taken the rail subsidy news as a means to increase exports, but this seems to make more sense if millers are not getting the supply. In any event, it does confirm the months-long thought that U.S. exports will likely pick up in the second half of the year as Russian exports should start to taper off.
Weekly export inspections were in line with expectations at 517,000 metric tons, but one of the primary takeaways was that Egypt did take U.S. wheat, which is a positive. A private analyst thinks that the U.S. Department of Agriculture will need to revise Australian wheat exports lower by 1 million metric tons due to their high internal prices. Another private analyst thinks U.S. winter wheat acreage needs to be reduced between 500,000 to 1 million acres due to the wet fall.
The market still awaits a lot of information including export sales for the past month and actual planted winter wheat acres from this fall. We also are awaiting in state winter crop ratings from Kansas, Oklahoma, Colorado and Texas, which could give the market some direction. The U.S. Drought Monitor shows no concerns for the major winter wheat growing areas compared to last year at this time, so it's likely that ratings will be high to start off the year.
Most eyes are on the Chicago March contract and the critical $5.245 mark which is viewed as a major technical hurdle. The market experienced one close above that level this week but failed to get a second close above that level.
For the week ending Jan. 24, March contracts for Minneapolis wheat were up 2 cents at $5.7625, up 3.75 cents at $5.215 for Chicago wheat, and up 5.5 cents at $5.115 for Kansas City wheat.
Corn futures continue to trade in a narrow range as the market awaits news from China/US. negotiations Jan. 30-31. The market also awaits the release of the January crop report which has been delayed with the government shutdown. Demand news and South American weather were two things that gave the market some direction this week.
Demand news continues to be supportive. It was reported that Chinese corn imports were up nearly 25 percent from last year, the highest since 2015. China imported 420,000 metric tons of corn in December. Weekly U.S. export inspections were a solid 1.108 million metric tons (43.6 million bushels) which was slightly above trade expectations. Cumulative exports of 810.1 million bushels are running 61 percent ahead of a year ago's pace. Taiwan purchased 65,000 metric tons of corn from Argentina for $210.50 per metric ton. U.S. and Brazil prices were $212.19.
Supply news remains focused on South American weather. Early week forecasts were calling for continued dryness in central and southern Brazil and increased chances for precipitation in Argentina which was more price friendly. However; revised forecasts on Jan. 24 showed increased chances for rain in the drier regions of Brazil and less chances of rain in Argentina's saturated areas. This gave the market a more negative tone on the Jan. 24 close.
Brazil's first corn harvest is just starting. Harvest is 4 percent complete which is right at the last average of the last two years. Brazil second corn crop planting is underway showing 12 percent planted compared to 2 percent last year and 8 percent in 2017. Argentina corn planting is 91 percent compared to 88 percent for the five-year average.
Ethanol production for the week ending Jan. 18 was 7.217 million barrels. This is down 1.9 percent from last week and down 2.92 percent from last year. Ethanol production for the last 10-week period is down 2.5 percent from last year's pace. It is becoming increasingly apparent that the 5.6 billion bushel corn for ethanol number will need to be revised downward in upcoming USDA reports. A 2.5 percent reduction would equate to roughly 300 million bushels. Ethanol stocks as of Jan. 18 were 23.501 million barrels. This is up 0.64 percent from last week and up 1.26 percent versus last year. Ethanol stocks remain historically high despite declining production. U.S. gasoline demand last week of 8.868 million barrels per day was up 2 percent from the same week last year and was the only weekly increase in the past eight weeks.
Crude oil stocks increased 7.97 million barrels to 445.03 million bushels while trade was expecting no increase. Gasoline stocks rose to 259.62 million gallons which was 2 million higher than trade expectations. Despite this, crude oil futures were 1 percent higher in Jan. 24 trade.
Soybeans are still looking for a direction as they traded on both sides of unchanged during the holiday shortened trading week. Rumors continue to fly regarding US/China trade talks. Soybean futures were under pressure early in the week after the White House announced that it rejected an offer for two Chinese vice-ministers to travel to the U.S. this week for preparatory trade talks. President Donald Trump rejected the offer because of a lack of progress on two key issues: "forced" technology transfers and potentially far-reaching "structural" reforms to China's economy. This is not expected to affect the Jan. 30-31 talks when the big guns from both sides are expected to face off. One thing to keep an eye on is Beijing threatening the U.S. if it proceeds with plan to extradite Huawei's CFO for violating the Iran trade embargo.
Central Brazil weekend rains fell short of expectations, leaving one-third of Brazil in dry conditions. Only 6 percent of Brazil's soybeans are harvested as of this weekend, so actual yields are still scarce but the ones that have been reported have been below expectations. Private analyst Cordonnier lowered his Brazil production estimate 1 million metric tons to 115 million metric tons with a lower bias. Weather forecasts for the next week are starting to switch more favorable for South American weather. Rain is expected to cover a larger area in Brazil (minus Mato Grosso) and heavy rains are shifting further south in Argentina.
A lack of USDA reports and news is wearing on traders as they would rather trade hard data rather than rumors. This is the main reason for the choppy, but range-bound trade.
Current support for the March contract is $8.77. Resistance is $9.1825 and then the five-month high of $9.4175. March soybeans are up 0.75 cents for the week ending Jan. 24.
For the week ending Jan. 24, March canola futures were up $2.80 Canadian at $487 Canadian per metric ton. The February Canadian dollar is at 0.7494. This brings the U.S. price to $16.52 per hundredweight.
• Velva, N.D., $16.40 per hundredweight, March at $16.30.
• Enderlin, N.D., $16.95 per hundredweight, March at $16.82.
• Hallock, Minn., $16.33 per hundredweight, March at $16.40.
• Fargo, N.D., $17 per hundredweight, March at $17.
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 $16.85, with March bids at $17.05.
For the week ending Jan. 24, soybean oil was up 50 cents at $29.51 on the March contract.