Trade makes a habit of ignoring positive headlines
Russian rumors were stirring again this week. A Russian news agency reported that Russia had set informal export quotas to prevent exports from exceeding current estimated levels. The news source also quoted shipping delays due to higher quality international standards. The Russian Ag Ministry denied this report.
An internal Russian wheat trader was quoted as stating there are 4 million to 5 million metric tons of old crop Russian wheat left to export. The last two years Russia has exported 13.3 million metric tons and 8.1 million metric tons during the March to June timeframe. So this does point to a slowdown in Russian exports that many traders have anticipated for the last six months.
In-state winter wheat ratings were posted for the first time since November. Most states showed declines, with the exception of Kansas, which has 51 percent good to excellent compared to 46 percent in November. A year ago Kansas was rated at 12 percent good to excellent.
Oklahoma is 38 percent good to excellent versus 56 percent in November and 4 percent last year. Texas is 38 percent good to excellent versus 48 percent in November and 4 percent last year. Nebraska is 60 percent good to excellent versus 66 percent in November and 43 percent last year. Colorado is 50 percent good to excellent versus 54 percent in November and 31 percent last year.
Soft red ratings in Kentucky and Illinois were on par with last year, but lower than November at 62 percent and 46 percent good to excellent, respectively.
Weekly export sales were 476,000 metric tons (17.5 million bushels) which exceeded trade expectations of 200,000 to 500,000 metric tons. Total commitments of 807 million bushels are tracking 1.5 percent higher than last year.
Both the six-to-10-day and eight-to-14-day forecasts call for much below normal temperatures through most of the country with better chances of moisture in the eight-to-14-day in the Kansas/Missouri/Nebraska corridor.
For the week ending Feb. 28, March contracts for Minneapolis wheat were up 0.25 cents at $5.67, down 34.25 cents at $4.525 for Chicago wheat, and down 17.5 cents at $4.41 for Kansas City wheat.
The corn market was under pressure this week as South American values have become cheaper than U.S. Gulf Coast bids.
South Korea feed mills purchased 133,000 metric tons of Argentine corn for $199.79 to $200.90 per metric ton for July delivery. Excluding freight values, this is $162 per metric ton versus the current U.S. Gulf bids at $175 per metric ton.
This sale announcement with these lower values pushed corn under May support of $3.75. The next level of heavy support is $3.6325. May resistance is $3.7975.
FC Stone estimates U.S. corn acreage for 2019 at 91.2 million acres compared to the current U.S. Department of Agriculture estimate of 92 million. The higher prices of fertilizer are limiting producer's thoughts on larger increases in corn plantings.
South African corn plantings estimates were higher than expected at 5.69 million acres (2.302 million hectares) which was down slightly from last year. Trade was expecting a larger decrease due to drought conditions.
Weekly export sales were above trade expectations coming in at 1.24 million metric tons (48.8 million bushels). Cumulative exports are on par with last year's pace. However, the U.S. had large exports during the second half of last year's marketing season due to the Argentine drought.
More analysts are thinking that USDA's export estimate for U.S. corn will be difficult to reach in the March to August timeframe of 2019. Mexico purchased 120,000 metric tons with 72,000 metric tons for new crop and 48,000 metric tons for old crop.
Weekly ethanol production was 7.196 million barrels. This is up 3.21 percent versus last week and down 1.53 percent versus last year. Stocks as of Feb. 22 were 23.709 million barrels. This is down 0.85 percent versus last week and up 3.18 percent versus last year. With one week to go before the halfway point of the marketing year, corn for ethanol usage is down 100 million to 110 million bushels versus last year while USDA is estimating a 30 million bushel reduction. Ethanol production will need to run 2.6 percent above last year's pace for the second half of the marketing year for the USDA estimate to be realized.
Crude oil stocks were expected to increase moderately but instead decreased, sending futures sharply higher in Feb. 28 trade. As of Feb. 22, crude oil stocks were 445.87 million barrels, a weekly decrease of 8.65 million barrels with the market anticipating a 2.8 million barrel increase. Gasoline stocks also declined slightly more than expected at 254.94 million barrels. Calendar-year gasoline consumption is essentially the same as last year, but we did see a 1.4 percent increase this past week from year ago same week levels.
Ethanol futures were on the rebound since mid-January lows of $1.27 and were moving into a former support level range of $1.33 to $1.38. However, the market experienced a key reversal lower in Feb. 25 trade after reaching $1.365 on the March contract. The $1.329 support level failed. Major support currently is $1.293. The price spread between E10 and E85 in the Fargo, N.D., market has widened from a dismal 27 cents through much of the winter to 40 cents recently.
The week began with China agreeing to purchase 10 million metric tons of U.S. new crop soybeans in an overall $30 billion package that was announced Feb. 22. The market reacted positively Monday showings signs of strength but gave way to bearish technical factors.
After the selling pressure beginning late in the day Feb. 25, there was a notable pattern forming. Positive news regarding U.S.-China trade negotiations push the market higher, only to be immediately followed by negative market correction.
The market is no longer satisfied with positive rumors about the trade negotiations. Instead, the market is searching for hard evidence and export data for the bulls to take back control. A confirmation of the reported 10 million metric tons of new soybean sales to China would be a good place to start for "hard evidence." It should also be noted that U.S. Gulf prices have risen above Brazil offers for the first time in over a year.
FC Stone has released a survey projecting 2019 soybean acres to be at 87.5 million. USDA has reported 85 million acres in soybeans and 91 million acres in corn. FC Stone apparently is predicting more soybean acres and less corn acres than the USDA. If this turns out to be true, we could see further increases in soybeans stocks.
In U.S.-China trade negotiation news, several articles have come out regarding the U.S.-China trade negotiations. National Economic Council Director Larry Kudlow has been quoted stating progress between the two countries has been "fantastic" and "we've never come this far on China trade." This is positive news, but when the two largest economies in the world are working on a trade deal, there only has to be one or two sticking points to keep a deal from keeping place.
U.S. and North Korean officials surprisingly failed to agree on a deal to have North Korea dismantle its nuclear armament.
Support for the May contract is at $9.0475 and $8.935 with a contract low of $8.53. The first point of resistance is at $9.345 which was on Feb. 25. May soybeans were down 13.75 cents for the week ending Feb. 28.
For the week ending Feb. 28, May canola futures were down $12.20 to $469.20 Canadian per metric ton. The March Canadian dollar was at 0.7610. This brings the U.S. price to $16.20 per hundredweight.
• Velva, N.D., $15.82 per hundredweight, April at $15.82.
• Enderlin, N.D., $16.31 per hundredweight, April at $16.40.
• Hallock, Minn., $16.21 per hundredweight, April at $16.11.
• Fargo, N.D., $16.45 per hundredweight, April at $16.55.
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 $4.80 in Dickinson.
Cash sunflower bids in Fargo were at $17.25. April bids were at $17.35.
For the week ending Feb. 28, soybean oil was down 61 cents at $30.25 on the May contract.