After a low, trade rumors, ethanol news support corn
The wheat market started the week reaching new contract lows with record net short positions in the Kansas City contract but experienced a bout of short covering on poorer than expected condition ratings.
State winter wheat ratings came in mostly lower with Texas down 8 percent to 28 percent good to excellent. Kansas increased 2 percent to 51 percent good to excellent and Oklahoma increased 3 percent to 56 percent good to excellent. Soft red ratings for Arkansas, Louisiana and Mississippi were released for the first time and were all below average. The Mississippi Delta is struggling with highly saturated conditions, and this favored the Chicago contract with higher gains than Minneapolis and Kansas City this week. The North American Millers Association estimates U.S. soft red wheat production at 269 million bushels compared to 286 million bushels in 2018.
A number of purchases have been made recently, with the U.S. continuing to be the residual supplier. Egypt rejected a cargo of Romanian wheat due to quality issues. Iraq purchased 100,000 metric tons of wheat split evenly between the U.S. and Canada. Syria purchased 200,000 metric tons of Black Sea Region wheat. France sold 450,000 metric tons of wheat to Algeria, which helped stop recent price declines in Matif futures.
Weekly export inspections totaled 592,000 metric tons (21.8 million bushels) for the week ending March 7, which was within expectations of 450,000 to 650,000 metric tons. Wheat inspections for 2018-19 total 646.8 million bushels, down 6 percent from a year ago and below the U.S. Department of Agriculture's revised forecast for a 7 percent increase. Wheat exports will need to average 23.8 million bushels over the last three months of the marketing year to meet USDA's projection. Weekly export sales were reported at 263,000 metric tons versus expectations of 400,000 to 600,000 metric tons.
Strategie Grains revised their European Union soft wheat estimate slightly to 146.1 million metric tons from 146.4 million metric tons. Part of that number was the German COOP Association estimating 2019 production at 24.2 million metric tons, almost 4 million metric tons higher than last year's 20.3 million metric tons. A Russian weather service left their January forecast unchanged, showing favorable conditions for crops.
The U.S. dollar softened roughly 100 points after a March 7 high of $97.16 which also supported wheat futures this week. May Minneapolis shows short-term support in the $5.48 to $5.44 levels, with short term resistance at $5.615 followed by $5.73.
For the week ending March 14, March contracts for Minneapolis wheat were up 3.25 cents at $5.525, up 13.25 cents at $4.5275 for Chicago wheat, and up 5.75 cents at $4.365 for Kansas City wheat.
Corn experienced a daily upside reversal in March 12 trade after reaching a new contract low of $3.61, just slightly below major support of $3.6325 on the May contract.
The market was supported by a few factors this week, including China rumors, slower southern planting pace and friendly news for ethanol. The market was dismissive of poorer export data this week.
Rumors of the Chinese buying up to 3 million tons of Pacific Northwest corn was one driver in the market, but we are lacking confirmation of this sale. The market is beginning to sense a conclusion to the U.S./China trade negotiations with support coming from positive comments made by top U.S. negotiators.
The Texas corn crop is 11 percent planted compared to last year's pace at this time of 24 percent. Conditions in the Mississippi Delta are soggy, with additional wet weather in the short term. This points to further delays in spring planting.
IEG Vantage has estimated U.S. new crop corn acres at 91.77 million, on par with the USDA's estimate of 92 million. A Reuters report was released stating, "U.S. farmers aren't dialing back soybean acres as anticipated." This narrative goes along with our belief that there won't be a large switch in acres from soybeans to corn due mostly in part to the higher input cost of nitrogen and the lack of fall field work that was completed because of wet conditions.
Weekly export inspections came in below expectations at 766,000 metric tons (30.1 million bushels). Trade was expecting between 800,000 metric tons to 1 million metric tons. This was below last year's 54.2 million bushels, which was heavy due to the Argentinian drought. Inspections total 1.0458 billion bushels, 31 percent ahead of last year and above USDA's estimate for a 3 percent decrease. Over the last five weeks, corn has been averaging 32.2 million bushels per week and will need to run around 42.5 million bushels through August to reach USDA's target. Weekly export sales were much below expectations at 372,000 metric tons. This was compared to expectations of 800,000 metric tons to 1.2 million metric tons.
According to the Conab, they have increased the Safrinha (second crop) corn production to 66.6 million metric tons from 65.2 million metric tons. Last year, the Brazil Safrinha crop was 53.9 million metric tons. Conab's estimate of the first crop came in lower at 26.2 million metric tons versus 26.5 million metric tons previously. This puts the total crop estimate at 92.8 million metric tons, while the USDA estimates 94.5 million metric tons. UKAgroConsult has estimated Urkaine 2019-20 corn production at 29 million metric tons, down from 35 million metric tons the previous year.
Weekly ethanol production was 7.035 million barrels, down 1.86 percent from last week and down 1.95 percent versus last year. Weekly production has been averaging 2.8 percent less than the prior year over the last 17 weeks. Stocks as of March 1 are 23.731 million barrels. This is down 2.18 percent from last week and down 2.27 percent from last year. U.S. gasoline demand in 2019 is running 0.8 percent below last year.
The EPA released a proposed rule to clean up regulatory language to allow E15 to be regulated in the same manner as E10 during the summer months. Currently retailers are required to label E15 for flex-fuel vehicles only from June 1 to Sept. 15 or face stiff fines. EPA administrator Andrew Wheeler stated the rules will be finalized "by the summer driving season."
The EPA also proposed reforms to the Renewable Identification Number market. Potential reforms include public disclosure of RIN holdings above specific levels, limiting certain parties from being able to purchase RINs and moving disclosure reports from annual to quarterly.
With what has become a broken record, a lack of U.S./China details and a definitive deal are proving tough for the grain complex.
Delays in an agreement between the world's top two economies are continuing to hold these markets hostage as there is no other fresh news to trump that fundamental burden. There is talk that the U.S. and China are still heavy into negotiations, but President Donald Trump and President Xi Jinping are not expected to meet until April now, and that is only if there is already an agreement in place.
Soybean futures are also feeling the pinch as soybean oil has been under recent pressure as palm oil eroded to its lowest level since mid-December on rising supply and lessening demand.
Soybean futures did find some underlying support as Conab came out with its monthly report for Brazil and showed their soybean production shrinking. Conab estimates Brazil's soybean crop dropped 1.8 million metric tons to 113.5 million metric tons versus Conab estimates last month of 115.3 million metric tons. The USDA's most recent estimate last Friday was at 116.5 million metric tons. Brazil's soybean production last year was a record at 119.3 million metric tons. The weekly Argentina Crop Roundup puts their soybean crop at 55 million metric tons, the same as the USDA. Brazil is 57 percent harvested versus 47 percent for an average this time of year. Pressure on Brazil's currency, the real, is helping Brazil's port bids to come in below U.S. Gulf bids.
Southern U.S. weather opens up before a wet pattern returns to the Mississippi Delta and Eastern Plains in the 11-to-15-day forecast and is not as warm as they were expecting a couple days prior. There has not been much negative weather news out of south Brazil or Argentina lately, and this is also keeping a cap on prices. Harvest is going well in Brazil, and timely rains are keeping Argentina's soybean crop estimates near the top end of yield ranges.
Informa updated its 2019 U.S. corn and soybean acre forecasts. They are estimating 91.8 million acres of corn (89.1 million acres last year) and 85.5 million acres of soybeans (89.2 million acres last year). This is in line with the World Agriculture Supply and Demand Estimate's February Forum forecasts of 92 million acres and 85 million acres.
For the week ending March 7, USDA reported 70.2 million bushels of soybean export sales for 2018-19 and 0.1 million bushels for 2019-20. Total commitments of 1.513 billion bushels in 2018-19 are down 16 percent from a year ago. Total soybean export shipments are down 31 percent from a year ago.
Soybean futures bounced off the new recent lows of $8.8775 as May soybeans try to trek back above the Dec. 27 lows of $8.935. The contract low of $8.53 set in mid September is now major support. Resistance is still the psychological $9 mark and then $9.345 which was the high on Feb. 25.
For the week ending March 14, May canola futures were up $3.90 to $461.20 Canadian per metric ton. The March Canadian dollar was at 0.7506. This brings the U.S. price to $15.70 per hundredweight.
• Velva, N.D., $15.53 per hundredweight, April at $15.53.
• Enderlin, N.D. $16.51 per hundredweight, April at $16.51.
• Hallock, Minn., $15.57 per hundredweight, April at $15.57.
• Fargo, N.D., $16.55 per hundredweight, April at $16.35.
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 $17.45. March bids were at $17.60.
For the week ending March 14, soybean oil was down 8 cents at $29.57 on the May contract.