With no market-moving news, funds are in control
The wheat market continued its implosion in the Kansas City and Chicago markets this week with steep losses.
Matif wheat futures continue their sharp sell off to $187.50 per metric ton on the March contract. French wheat futures have more of an inverse, with their May and September contracts discounted to their March contract which is going off the board. May is quoting $184.50 per metric ton and September is quoting $175.25 per metric ton. This is one of the tougher things to look at in the future. The U.S. was $6 per metric ton higher than European offers on a Saudi Arabia tender over the weekend. European futures prices are actually cheaper moving forward, whereas the U.S. wheat markets are showing a carry.
Weekly export sales totaled 622,000 metric tons (22.8 million bushels) which was solidly above expectations of 200,000 to 500,000 metric tons. Total commitments of 830 million bushels are up 3 percent from a year ago. Weekly export inspections totaled 440,000 metric tons (16.2 million bushels), which was well below trade expectations of 600,000 to 800,000 metric tons. Inspections total 623 million bushels, down 7 percent from last year but still vastly below U.S. Department of Agriculture's 11 percent increase projection.
Weekly in-state wheat ratings showed 2 percent declines in the good to excellent category for both Kansas and Texas. However; Oklahoma saw a notable increase of 15 percent.
According to the latest Commodity Futures Trading Commission data for Feb. 26, Kansas City wheat has a record net short of 41,557 contracts. The combined wheat short is 108,322 contracts. With this heavy of a short position, it is setting up for a short covering bounce. It will be tougher for the funds to press much lower with oncoming spring weather.
The spring guarantee price for spring wheat has been calculated off the September contract average during the month of February at $5.77 per bushel. This is 54 cents off last year's $6.31 guarantee. Durum wheat is set at $5.98.
Trade estimates for Friday's monthly World Agricultural Supply and Demand Estimates report are out. Average guesses for 2018-19 U.S. ending stocks are 1.02 billion bushels. World ending stocks are estimated at 267.47 million metric tons. Both of these figures are nearly unchanged from the February USDA report.
For the week ending March 7, March contracts for Minneapolis wheat were down 5.25 cents at $5.53; down 19 cents at $4.3825 for Chicago wheat; and down 17.25 cents at $4.275 for Kansas City wheat.
After a key upside reversal in March 1 trade, the corn market appeared to have put in a near term low of $3.66 on the May contract. Prices rebounded for the first couple sessions this week but were met with selling pressure pushing contracts back to $3.645 in March 7 trade. It appears that the market is attempting to put in a short term low. May support is the $3.6325 low of Sept. 18. May resistance is $3.795.
The spring guarantee price for corn settled at $4 compared to $3.96 last year. The soybean to corn ratio is 2.38 versus 2.56 last year. At face value, this ratio does point to additional corn acreage in 2019. However, higher input prices, particularly fertilizer, may limit any large corn acreage increase. Cold and wet spring weather forecasts are also pointing to larger prevented planting acreage.
Weekly export sales were 969,700 metric tons (38.2 million bushels) which was within market expectations of 700,000 metric tons to 1.1 million metric tons. Although this number was within expectations, it was down sharply from last week's 48.8 million bushels. Total commitments for 2018-19 are 1.595 billion bushels and are down 1 percent from a year ago. Weekly export inspections totaled 866,000 metric tons (34.1 million bushels) and were right in line with expectations of 750,000 to 950,000 metric tons. Yearly inspections total 1.015 billion bushels, 36 percent higher than last year. South Korean feed mills have been purchasing corn from Brazil at cheaper prices than the U.S. now that their first crop harvest supplies have come online. These lower South American values have given the market a negative slant.
Weekly ethanol production ending March 1 was 7.168 million barrels. This is down 0.39 percent from last week and down 3.12 percent from last year. Stocks as of March 1 were 24.261 million barrels, 2.33 percent higher than last week and 4.83 percent (47 million gallons) higher than last year. This is the second-highest stocks level on record. Corn will need to average 107.289 million bushels per week, or 3.1 percent above year ago levels to meet USDA's estimate of 5.575 billion bushels. Calendar year gasoline demand is running 0.3 percent less than last year.
Total 2018 U.S. ethanol exports were 1.704 billion gallons, up 25 percent from 2017. Imports were 270.6 million gallons, virtually unchanged from 2017. Annual dry distillers grains exports for 2018 were up 7 percent to 11.88 million metric tons.
With the decline in futures prices, some decent basis bids have popped up in certain locations recently. If you have an ethanol plant or elevator that is offering a better than normal basis for spring or summer delivery — that appears to be the better opportunity now. You can lock basis, get some delivered and wait for futures prices to improve.
March 8 will be the monthly World Agricultural Supply and Demand Estimates crop production report. Estimates for 2018-19 U.S. ending stocks average 1.736 billion bushels. World ending stocks average guess is 309.06 million metric tons. Both of these estimates are virtually unchanged from the February report. Average estimates for Argentina and Brazil corn production are 45.92 million metric tons and 94.66 million metric tons, respectively.
Soybean prices started off the week with gains but were under pressure the rest of the week. Soybean futures did not get beat up as bad as the corn and wheat markets though. Out of the three main grain commodities, soybeans seem to have the worst fundamentals but are holding up better than the other grains and are not at contract lows like corn and winter wheat. It just goes to show that the funds are in control of the grain markets and are trying to put optimum hurt on the commercials and farmers. There is not much fresh news at the moment to get the funds nervous of a quick turnaround.
What we can hope for is for some of these funds that are comfortable with their shorts is to get trapped in their own game, but it appears like an agreement with China is the only thing that can drive these markets through resistance and stop the bleeding. There is growing optimism that the U.S. and China are getting closer to a deal. But until there is something in writing, it looks like any market optimism may be tempered until we hear details of the give-and-take during negotiations. The trade is growing impatient with the rumors as a boy can only cry wolf so many times before he is ignored.
Soybean export sales were poor this week and did not do the market any favors. South America weather has been mostly favorable for harvesting soybeans. There are reports that a few main roads have been temporarily shut down for repairs due to muddy conditions. They go through this issue every year but seem to end up getting their grain to the ports.
Futures broke through support for the May contract of 9.0475. Next support is $8.935, and a contract low of $8.53 is major support. The first point of resistance is at $9.345, which was on Feb. 25. May soybeans were down 9 cents for the week ending March 7. The Crop Insurance Spring Discovery price for soybeans is $9.54, down from $10.16 last year.
As of Feb. 28, the USDA reported 11.4 million bushels of soybean export sales for 2018-19 and 2.6 million bushels for 2019-20. Total commitments of 1.443 billion bushels in 2018-19 are down 18 percent from a year ago. Soybean inspections for 2018-19 total 953.6 million bushels, down 33 percent from the previous year and below USDA's estimate for a 12 percent decrease.
For the week ending Feb. 28, May canola futures were down $5.10 to $456.20 Canadian per metric ton. The March Canadian dollar was at 0.7436. This brings the U.S. price to $15.39 per hundredweight.
• Velva, N.D., $15.21 per hundredweight, April at $15.21.
• Enderlin, N.D., $16.06 per hundredweight, April at $16.06.
• Hallock, Minn., $15.24 per hundredweight, April at $15.24.
• Fargo, N.D., $15.90 per hundredweight, April at $15.80.
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 $4.70 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.35, with April bids at $17.45.
For the week ending Feb. 28, soybean oil was down 45 cents at $29.63 on the May contract.