US dollar keeping grains in check
Resistance levels held firm this week as the wheat market encountered a higher trending U.S. dollar. The U.S. dollar experienced seven sessions in a row of gains from the $95 to the $96.49 level. Matif wheat futures closed at $202 per metric ton, which was the lowest level since mid-January.
Stats Canada reports all wheat stocks as of Dec. 31 at 23.233 million metric tons, which was slightly below market expectations of 23.4 million metric tons. This leaves stocks virtually unchanged from year-ago levels of 23.283 million metric tons. Durum stocks were slightly above expectations at 5.328 million metric tons. Canadian durum stocks for last year were 4.734 million metric tons. Barley and oats stocks were significantly lower than the average trade estimates.
SovEcon increased its 2019 wheat crop projections 2.7 million metric tons to 80 million metric tons. If realized, this would be 10 million metric tons higher than last year. Ukrainian ag officials reported that more than 95 percent of their winter seeded crops are in viable condition. There have been reports of trucking disruptions across southern Russia. This brings to light earlier reports of the government trying to subsidize internal rail rates.
Weekly wheat export inspections were 440,000 metric tons (16.2 million bushels), which was at the lower end of expectations. This weekly total is in line with the last four weeks, but it is becoming more of a reality that the U.S. Department of Agriculture will have to lower its U.S. export projections unless these weekly totals consistently stay above 22 million bushels.
Egypt tendered for an unspecified amount of wheat for late March shipment. U.S. soft red was the lowest bid at $235 per metric ton which was much lower than the second lowest bid from France at $244.86 per metric ton. After freight values, the U.S. offer was $1.02 lower. This provided the Chicago market more strength late week.
Average trade guesses for all winter wheat planted acreage are 32.12 million acres. This compares to 32.53 million acres last year. Average guess for Dec. 1 U.S. ending stocks is 1.975 billion bushels. U.S. ending wheat stocks for 2018-19 average guess is 989 million bushels compared to 974 millon bushels in December. The 2018/19 world ending wheat stocks average estimate is 268.09 million metric tons compared to 268.10 million metric tons in the December report.
For the week ending Feb. 7, March contracts for Minneapolis wheat were down 11 cents at $5.645, down 11 cents at $5.1325 for Chicago wheat, and down 12.5 cents at $4.9625 for Kansas City wheat.
The corn market remained in its narrow trading range this week as the market seemed content to await the Feb. 8 crop report, which will also feature delayed January monthly numbers. Current support for March is $3.715 with resistance at $3.82.
Weather forecasts in South America are leaning more favorable, which gave the market pressure in Feb. 7 trade. Six-to-10-day forecasts call for half-inch to 1½-inch rains across 80 percent of Brazilian growing regions, which is favorable for second crop corn plantings.
U.S. exports sales ending Dec. 27, were a nine-week low at 503,000 metric tons (19.8 million bushels) but keep in mind this was data for the week of Christmas. Commitments are running 19 percent ahead of last year's pace. Mexico was the largest buyer at 181,000 metric tons.
U.S. trade officials are requesting Brazil eliminate the 20 percent import tariff that was placed on U.S. ethanol in September 2017. The tariff did not have a negative effect on the U.S. exports to Brazil last year, but keep in mind Brazil and Argentina had lower production totals due to drought conditions.
Weekly ethanol production was sharply lower at 967,000 barrels per day, marking the lowest weekly total since October 2016. This is an 8.5 percent decline from last year's same week production. U.S. ethanol production is now averaging 3 percent less than last year over the past 12 weeks. Ethanol production would need to average 2.5 percent above last year each week to meet USDA's estimate of 5.6 billion bushels of corn utilized for ethanol. Despite the 8.5 percent reduction, ethanol stocks were basically unchanged from week ago levels at 23.947 million barrels and reflect the fifth highest weekly stocks total on record. Ethanol futures were 0.61 percent lower on this report.
Crude oil stocks rose to 447.21 million barrels, which was 940,000 less than expected. Gasoline stocks rose to 257.89 million barrels, which was 1.09 million less than expected. U.S. gasoline demand is averaging 8.961 million gallons per day, up 1.1 percent from last year.
The average trade estimates for the Feb. 8 crop report put U.S. corn yield at 177.9 bushels per acre versus the December yield of 178.9 bushels per acre. This would put final U.S. corn production at 14.532 billion bushels compared to the November report of 14.626 billion bushels. Average estimates call for slightly lower Brazil and Argentina corn production numbers than the USDA published in December. USDA has Brazil at 94.5 million metric tons versus 93.41 average guess. Argentina is at 42.5 million metric tons versus 43 average guess. If we come in at the averages, this would be 22 million metric tons higher for both Brazil (+11 million metric tons) and Argentina (+11 million metric tons) production from last year's drought stressed crop.
U.S. ending stocks average guess for 2018-19 is 1.708 billion bushels versus 1.781 billion bushels December USDA estimate. World ending stocks average guess is 307.06 million metric tons versus 308.8 million metric tons in the December report.
Despite daily export sales to China, soybean futures saw losses this week and also saw its largest single day loss in more than three weeks Thursday. Pressure came from weak outside markets, a hit in crude futures and six straight days of gains in the U.S. dollar index. Uncertainty coming with the trade talks as we inch closer to the March 1 deadline is also keeping this market from breaking loose. The USDA announced multiple sales to China this past week to bring the three-day total to 4.1 million metric tons (150.6 million bushels). These sales were part of the 5 million metric tons pledge from China last week.
During the week of Feb. 11-15, top U.S. negotiators will be in China, negotiating a trade agreement with China that still seems a ways from getting finalized. President Donald Trump's office said it is "highly unlikely" that Trump will meet with President Xi Jinping of China by the March 1 deadline.
There wasn't as much optimism for the soybean numbers as there was for winter wheat and corn numbers heading into the Feb. 8 USDA report. The biggest question heading into the report was what they were going to do with U.S. exports and ending stocks? Prices will have a hard time holding on if ending stocks number continue to stick around the 1 billion bushel mark.
Rain coverage forecasts are improving across north Brazil while Argentina dries up after a heavy dose of rain for the weekend of Feb. 8-9. Not sure how much this weather in northern Brazil will help their soybean crop much as almost 20 percent of Brazil's soybeans have been harvested already. (Mato Grosso is almost 40 percent complete.) Yield reports out of Mato Grosso are rumored to be 10 percent less than last year, with Panara estimates a little worse than that.
The weekly South America crop round up has Brazil's crop at 114 million metric tons. It has Argentina's soybean crop at 55 million metric tons versus the USDA at 55.5 million metric tons. FC Stone is estimating Brazil's soybean crop at 112.2 million metric tons, which is the smallest estimate so far that has been released. CONAB will give its estimates for this year's crop on Feb. 12.
Current support for the March contract is $8.80. Resistance is $9.3125 and then the six-month high of $9.4175. March soybeans were down 4.5 cents for the week ending Feb. 7.
For the week ending Feb. 8, March canola futures were up $1.20 cents at $483.60 Canadian per metric ton. The Canadian dollar was at 0.75405. This brings the U.S. price to $16.54 per hundredweight.
• Velva, N.D., $16.22 per hundredweight, March at $16.25.
• Enderlin, N.D., $16.83 per hundredweight, March at $16.88.
• Hallock, Minn., $16.52 per hundredweight, March at $16.52.
• Fargo, N.D., $17.05 per hundredweight, March at $17.20.
Stats Canada reported that as of Dec. 31, canola stocks were at record highs of 14.553 million metric tons but below expectations of 14.7 million metric tons. CHS Hallock went to a zero basis for front month contracts. When pricing canola, there are three primary things to evaluate: canola futures, Canadian Dollar values and basis levels.
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.
Stats Canada reported barley stocks as of Dec. 31 were 4.938 million metric tons and well below expectations of 5.6 million metric tons. This could positively affect barley prices.
Cash bids for milling quality durum are $4.50 in Berthold and at $4.70 in Dickinson, N.D.
Stats Canada reported Friday durum stocks as of Dec. 31 were 5.328 million metric tons and slightly above expectations of 5.2 million metric tons.
Cash sunflower bids in Fargo were at $17. March bids were at $17.15.
For the week ending Feb. 8, soybean oil was up 89 cents for the week at $30.78 on the March contract.