With still no China deal, little good news for row crops
Stats Canada gave the market another drubbing this week on higher than expected spring wheat planting intentions. May Minneapolis hit a contract low of $5 in April 24 trade.
Stats Canada released its Estimates of Principle Field Crops report April 24. All wheat acres including durum are estimated to be 25.7 million acres vs. trade expectations of 24.8 million acres vs. 24.73 million acres last year. Spring wheat acres are expected to increase 2.07 million acres to 19.387 million acres, a 12% increase from 2018. Durum acreage is expected to decline 1.16 million acres to 5.02 million acres, 18.8% less than 2018. Canola acreage is expected to decline 6.6% to 21.3 million acres vs. expectations of 21.8 million acres vs. 22.81 million acres last year.
Spring wheat planting pace is 5% compared to 22% for the average and 3% a year ago. Winter wheat conditions improved 2% in the good to excellent category for the 18 primary winter wheat producing states. Kanas declined 2% and Oklahoma declined 4%. Colorado had a noticeable improvement of 11% and Texas improved 1%.
Weekly export sales were at the top end of expectations at 425,300 metric tons (15.6 million bushels). Yearly commitments now total 931 million bushels, 9% above year ago levels and are approaching USDA's 945 million bushels export estimate with six weeks to go in the marketing year. Sales have been tracking close to the target, but shipments have not been meeting the pace.
Weekly export inspections were above trade expectations with a marketing year high of 811,000 metric tons (29.8 million bushels). Cumulative exports are running 762 million bushels, down 3.6% from last year. Despite the good weekly number, it is becoming more likely that wheat shipped exports will not meet the 945 million bushel USDA target. With the recent increases in Russian production, some are speculating that USDA may need to cut this number another 95 million bushels to 850 million bushels.
April 26 is option expiration for the May contracts. The highest option volume is at the 450 strike price in Chicago and at the 430 strike price in Kansas City. Although these levels are highly doubtful to reach by the April 26 close, a six cent gain in Chicago would eliminate 4,800 put options compared to 2,800 calls. A six cent gain in Kansas City would take out 976 put options compared to 192 call option volume.
Weather runs show increased chances of rainfall for eastern Australia. Both eastern and western Australia have been struggling with drought last year. Western areas are less promising for rain in the 11- to 15-day forecasts. Eight- to 14-day forecasts show cooler and wetter conditions for the spring wheat belt.
Minneapolis and Kansas City futures hit new contract lows in April 24 trade. For the week ending April 25, May contracts for Minneapolis wheat were down 18.25 cents at $5.05, down 9.5 cents at $4.3475 for Chicago wheat, and down 15.75 cents at $4.0425 for Kansas City wheat.
The crude oil market reached yearly highs this week after the U.S. State Department announced it will eliminate in May all waivers allowing eight countries to buy Iranian oil without facing U.S. sanctions. Unfortunately, U.S. corn futures could not follow the excitement in the crude oil market.
The U.S. dollar blew through $97.16 resistance in the April 23 session and reached $98.055 at week's end. This is another negative development for the U.S. grains complex. South American corn offers are currently lower than the U.S. Gulf bids and a strengthening dollar will make it tougher for U.S. prices to be competitive.
Weekly export sales were in line with expectations at 779,900 metric tons (30.7 million bushels). Export commitments now total 1.790 billion bushels down 9% vs. last year and vs. USDA's estimate for a 5.7% decrease.
Ethanol stocks as of April 19 were 22.747 million barrels, nearly unchanged from last week and up 4.82% vs. last year. U.S. gasoline demand last week was 9.409 million barrels per day. 2019 calendar year gasoline demand is running 0.3% behind last year.
With the drop in corn futures prices and the increase in crude oil futures, we have seen a widening of the spread price of E-85 to E-10 to the 45 cent range in the Fargo market. In evaluating weekly continuation charts over the past few years, there is a good correlation for the spread to widen to more than 50 cents or more when corn futures are under $3.60 and crude oil futures are over $56 per barrel. There were statements from Iran this week about causing trouble in the Strait of Hormuz after the sanctions announcement. I would expect the E-85 price spread to continue widening with further strength in the U.S. dollar and a somewhat nervous crude oil complex.
Weekly continuation charts show $3.35 to $3.45 as heavy support on front month contracts. The market has traded under $3.35 on the front month over the past few years but hasn't stayed there for extended periods.
Corn planting is 6% vs. the 12% five-year average and the 5% pace last year. Trade was expecting 7-8%. Illinois and Missouri are the farthest behind their normal pace.
The bleeding won't stop as the row crop markets saw another week of heavy pressure.
U.S. and Chinese negotiators are expected to meet the next two weeks to hammer out a deal that could be ready to sign by the end of May. The trade will not price in these rumors anymore until they are sure a deal is close to getting signed and is good for ag commodities.
May options expire May 26 and soybean longs need to be out on April 29 or they risk going into delivery. The funds are putting optimum hurt on the farmers that are long on the board or still long by holding grain in the bin waiting for the U.S. and China to put an end to the trade war and get a trade agreement wrapped up. According to RJ O'Brien, estimated managed funds were net short -110,000 soybean contracts as of the April 24 close. This is approaching the record managed fund soy short of -119,000 contracts posted in June 2017.
Any delays into mid-May may push more farmers to plant more soybeans than they were planning. Soybeans planted for the week ending April 21 was 1% complete vs 2% last year and 2% for the five-year average. The first USDA crop progress report in May will be important as concerns will start to mount if we get to the May 10 weekend well behind schedule for planted acres.
A slow start to the planting season and poor spring wheat prices may start putting doubt in the trades mind that soybean acres will be as low as the USDA is estimating. Just an example of how quickly U.S. farmers can sow seed; last year about 45% of row crops were planted in about 10 days starting the first full week of May.
When all is said and done, South America is expecting a 10-11 million metric tons larger crop than last year and that is why prices are under as much pressure as they are. The Rosario Grain Exchange increased Argentine soybean production to 56 million metric tons vs. the USDA's 55 million metric tons. Argentina's production last year was only 37.8 million metric tons. Brazil's production is expected to come in around 115 million metric tons. AgRural estimates 92% of Brazil's soybeans are harvested. South American bid offers are also still cheaper than U.S. Gulf bids.
Nationally, farmers in Canada expect to seed 5.6 million acres of soybeans in 2019, down 10.7% from 6.3 million acres in 2018. Dry conditions over the past two years in western Canada contributed to lower yields, which may have contributed to some farmers deciding to decrease seeded area of soybeans.
November soybeans closed at lows last seen on Sept. 19. November soybeans broke through support what was the Oct. 31 low of $8.975. That puts $8.7925 as the next support and then the contract low of $8.6475 set in mid-July is major support. The technical charts are a mess but major resistance if we get a trade deal done is the 10-month high of $9.71 that was set on Dec. 12. For the week ending May 25, November soybeans were down 20.25 cents. Soybeans are about 40 cents lower in the last two weeks.
For the week ending April 25, May Canola futures were down $6.70 to $442.40 metric ton Canadian. The April Canadian dollar was at 0.7418. This brings the U.S. price to $14.89 per hundredweight.
• Velva, N.D., $15.17 per hundredweight, June $14.76
• Enderlin, N.D. $15.47 per hundredweight, June $15.44
• Hallock, Minn, $15.05 per hundredweight, June $15.02
• Fargo, N.D., no bid, beginning May 17 $15.45
In Canada, farmers expect to plant 6.6% less acres of canola, to 21.3 million acres in 2019 compared with the previous year. If seeding intentions are realized, this would represent the lowest seeded area of canola since 2016 and 1.6% lower than the five-year average of 21.7 million acres. Record high year-end stocks for the 2018 calendar year, coupled with concerns regarding limited access to China's canola market, possibly affected anticipated seeding area.
Cash feed barley bids in Minneapolis were at $3, while malting barley received no quote. Berthold, N.D., bid is $2.50 and CHS Southwest New Salem, N.D., bid is $2.55.
At the national level for Canada, farmers expect to seed more acres of barley compared with 2018. Larger expected seeded area in Manitoba, Saskatchewan and Alberta could push total anticipated area up 10.2% to 7.2 million acres in 2019.
Cash bids for milling quality durum are $4.50 in Berthold and at
$4.55 in Dickinson, N.D.
Canadian farmers' durum wheat acreage is expected to decrease 18.8% to 5 million acres. The anticipated decline in durum wheat area is the largest since 2010, when seeded area declined by more than 2.5 million acres.
For the week ending April 25, xash sunflower bids in Fargo were at $17.45. June $17.50. Soybean oil was down 17 cents at $27.59 on the May contract.