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Erin Brown / Grand Vale Creative

U.S.-China negotiations continue to hold markets hostage

Wheat

The wheat market saw losses this week as the polar vortex cold snap didn't give this market its expected boost.

The U.S. lost a tender to sell wheat to Egypt. It lost to Romania and France despite having the lowest bid because with higher freight costs, it was still cheaper for Egypt to buy from other sources. U.S. prices are competitive and could lead to better export news going forward, but freight is the deciding factor currently. Romania, Russia, and France are all cheaper than the U.S. once freight is added on, and U.S. wheat prices may need to fall 4 to 5 percent to win future tenders.

The trade doesn't seem as concerned about the cold snap that is hitting the Midwest this week. It will also take some time to see how much damage is done after the recent polar vortex, and it is yet to be seen how far south freezing temps have reached. The significant warm up this weekend may be causing traders to have a short memory of the two-day deep freeze. T

he U.S. cold snap is increasing risks for winterkill in some regions. Eastern Colorado and western Kansas have risk of winterkill with inadequate snow cover. Portions of the soft red belt including northern Ohio, northern Indiana and southern Michigan appear to be more susceptible.

Russia keeps announcing news that contradicts itself. Russia's Grain Union came out and said the country's 2019 grain crop could top 120 million metric tons, with 75 million metric tons to 76 million metric tons of that wheat. This came only a couple days after the Russian Ag Ministry estimated the 2019 grain crop at only 108 million metric tons to 110 million metric tons versus 113 million metric tons last year. Who do we believe is the main question? SovEcon estimates Russian exports for January were 1.9 million metric tons versus 3.734 million metric tons in December. This is also below the 2.48 million metric tons last year for January. Russia exports seem to be slowing after swift exports have been the news the past six months.

Congress approved a short-term three-week funding bill that helped get federal operations up and running. This is only a short term funding bill and the government could shut back down if an agreement isn't reached by Feb. 15. The U.S. chief economist said the Feb. 8 World Agricultural Supply and Demand Estimates report will released as scheduled and said they will not reschedule the January report.

U.S. Department of Agriculture weekly reports were finally released again for the first time in five weeks, starting with weekly export sales and Commitments of Traders data. It may take a month to get caught up on and up to date with all the data, and they will not release five weeks of data all at once. The weekly export data that was released Jan. 31 was for the week ending Dec. 20.

For the week ending Jan. 31, March contracts for Minneapolis wheat were down 4.75 cents at $5.70, down 3.5 cents at $5.165 for Chicago wheat, and down 10.5 cents at $4.99 for Kansas City wheat.

Corn

Corn futures continue to trade in a tightly wound sideways pattern. According to Karen Braun, an ag columnist for Reuters, March corn futures have closed within an 11.75 cent range so far this month, the smallest January range since 2002 (8.75 cents). The 2019 difference between the high and low future prices that were traded this year is only 13.5 cents apart, which percentage-wise is the smallest for January since 1985. New capital won't likely come flowing into the corn complex until we start seeing more volatility in the commodity markets. Talks wrapped up after two days of talks between the U.S. and China. There has been a lack of details how the negotiations went. U.S.-China negotiations continue to hold these markets hostage.

It is now confirmed that the January Annual Crop Production report, Winter Wheat Seeding report, and the quarterly Grain Stocks report will be released on Feb. 8. The final yield and production number will be the number looked at the most. It is hoped a verification of lower yields will be what is needed to break corn out of its funk and narrow trading range. March corn was down 3.75 cents for the week ending Jan. 31.

U.S. crude prices ended the month up 18.5 percent for the best January on record. March crude oil futures have seen an $11 rally coming off the lows of $42.67 set Dec. 24. A drop on U.S. fuel stockpiles, Venezuela sanctions, and a pause in U.S. interest rate hikes are giving this market support. Concerns about slowing global economy and weakening fuel demand could give this market pause, although weekly data showed a 5.7 percent demand increase from the week prior.

Ethanol production for the week ending Jan. 25 averaged 1.012 million barrels. This is down 1.84 percent versus last week and down 2.69 percent versus last year. Stocks were at 23.98 million barrels, up 2.04 percent from last week and up 4.04 percent versus last year. Corn used for last week's production was 104.4 million bushels. Corn use needs to average 107.6 million bushels per week to meet the USDA's goal of 5.6 billion bushels.

Safrina corn planting in Brazil is off to a fast start due to an early soybean harvest. The corn already planted is said to have good emergence so far. Buenos Aires Grains Exchange increased Argentina's 2018-19 corn production estimates to 45 million metric tons versus 43 million metric tons in its previous estimate. USDA estimates 42.5 million metric tons.

Soybeans

Soybeans were on the defensive this week as South American weather forecasts improved and U.S.-Chinese trade talks seemed to be in a kick-the-can-down-the-road mentality. Multiple media outlets including Bloomberg, Reuters, JP Morgan were differing on predictions. There was an underlying theme that both sides need to come to some type of agreement to stop any further economic declines and uncertainty. More think that the March 1 deadline for additional tariffs going into place will simply be extended, allowing more time for negotiations.

The 11-to-15-day forecasts show rains for a majority of the Brazilian soybean growing region with temperatures moderating, although hotter temperatures will occur in northern Brazil through the weekend. Northern Argentina is forecast for heavier rains in the one- to five-day forceast, with 11- to 15-day models showing a wet pattern developing over most of the country.

The Brazilian crush industry association lowered its production estimate by 3 million metric tons to 117.9 million metric tons, which matches other industry sources who have cited declines recently. CONAB's most recent estimate was 118.8 million metric tons. The group also is estimating 10 million metric tons less of exports, but 10 million metric tons more of internal soybean crush. Another private analyst estimated Brazil soybean production at 116 million metric tons and Argentina at 55 million metric tons to 56 million metric tons. Brazil soybean harvest is at 11 percent, well ahead of the average pace of 3 percent with the lower yields most likely the first harvested.

The European Union stated that U.S. soybeans would be acceptable to use for internal biodiesel production, but analysts don't expect a major influx of European buying.

Weekly export inspections totaled 34.1 million bushels for the week ending Jan. 24. Inspections total 751.8 million bushels and are running 39 percent less than a year ago. USDA confirmed that the Jan. 2 crush report will be released Feb. 4. The USDA also announced the deadline for farmers to apply for relief against tariffs has been extended to Feb. 14 from Jan. 15.

Soybean oil contracts have been straight up for two weeks and nearly reached their Oct. 4 highs of $30.50 before backing off in Jan. 31 trade. Technically, the soybean and soybean oil contracts are overbought. March soybeans reached $9.2675 in Jan. 31 trade before reversing lower. Current support for the March contract is $9.0525. The $9.26 level serves as a resistance point that has held recently, with the five-month high of $9.4175 acting as major resistance.

Canola

For the week ending Jan. 31, March canola futures were down $7 to $481.70 Canadian per metric ton. The February Canadian dollar was up 0.0052 at 0.7615. This brings the U.S. price to $16.64 per hundredweight.

• Velva, N.D., $16.49 per hundredweight, March at $16.38.

• Enderlin, N.D. $17.11 per hundredweight, March at $17.11.

• Hallock, Minn., $16.40 per hundredweight, March at $16.47.

• Fargo, N.D., $17.00 per hundredweight, March at $17.15.

Barley

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.

Durum

Cash bids for milling quality durum are $4.50 in Berthold and at $4.60 in Dickinson, N.D.

Sunflower

Cash sunflower bids in Fargo were at $16.90. March bids were at $17.05.

For the week ending Jan. 31, soybean oil was up 14 cents at $30.17 on the March contract.