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Erin Brown / Grand Vale Creative

More moves in US-China chess match

Wheat

Spring wheat is 22% planted compared to 49% for the five-year average. Trade was expecting 25-26%. Spring wheat emergence is 4% compared to 19% for the five-year average.

South Dakota is 19% planted compared to 76% average, and they have already passed the May 5 deadline for final planting in the southern half of the state. The northern half of South Dakota and the southern third of Minnesota have until May 15 before producers would get reduced coverage. Winter wheat conditions remained steady from the week prior at 64% good to excellent; 29% of the winter wheat crop is headed compared to 41% for the five-year average.

Stats Canada released its quarterly stocks report May 7. As of March 31, total wheat stocks declined 4.3% from the previous year to 15.7 million metric tons. On farm stocks are 11.4 million metric tons and commercial stocks are 4.3 million metric tons. Wheat exports increased 9.1% year-over-year due to stronger global demand and a weaker Canadian dollar.

Weekly export sales were at the low end of expectations at 91,000 metric tons (3.3 million bushels). Wheat export commitments now total 939 million bushels for 2018-19 versus the U.S. Department of Agriculture's estimate of 945 million bushels with three weeks to go. New crop sales were above market expectations at 412,000 metric tons (15.1 million bushels). Commitments total 94 million bushels 2019-20 versus the five-year average of 100 million to 151 million bushels. SovEcon reiterated its estimate of an 83.4-million-metric-ton crop, up from 71.7 million metric tons in 2018.

May 6 trade saw Minneapolis contracts getting to within one to 2 cents of contract lows before buying pushed contracts higher. Kansas City and Chicago contracts showed weakness late week, but so far are holding contract lows. Hopefully, this chart action will hold and we can say we put in a short term bottom.

For the week ending May 9, July contracts for Minneapolis wheat were up 2.25 cents at $5.17255, down 8.5 cents at $4.295 for Chicago wheat, and down 3.75 cents at $3.9775 for Kansas City wheat.

Corn

The corn market opened 15 cents lower to open the week in reaction to President Donald Trump's Twitter post that U.S. tariffs will increase from 10% to 25% on $200 billion worth of Chinese goods by Friday, May 10. An additional $325 billion of Chinese goods that come into the U.S. that is untaxed will be tariffed at 25%. The steep decline was met with some buying as planting delays and cooler forecasts lifted contracts off their lows. The market rebounded to $3.6825 July during the week but could not come close to critical $3.73 resistance. The contract low of $3.515 July was nearly hit in May 9 trade on rather poor export sales.

Weekly crop progress shows corn planted at 23% compared to 46% for the five-year average. Trade was expecting 25%. Illinois, Indiana, Michigan, Ohio, Wisconsin, Minnesota and the Dakota's are lagging well behind normal. Only 6% of corn is emerged compared to 13% for the five-year average.

Weekly export sales were a yearly low of 288,000 metric tons (11.3 million bushels), which was well below market expectations of 500,000 to 800,000 metric tons. Total commitments are 1.824 billion bushels, down 10.2% from a year ago with USDA estimating a 5.7% decline. This put heavy pressure on the market in May 9 trade.

Weekly export inspections totaled 977,000 metric tons (38.5 million bushels) which was within the range of trade expectations. This was the lowest export total in seven weeks. Inspections now total 1.402 billion bushels, up 7% from last year but this pace will likely slow down given the larger South American crop. Export inspections will need to run about 37 million bushels per week to meet USDA's target of 2.3 billion bushels.

Weekly ethanol production totaled 7.252 million barrels, up 1.17% from last week and down 0.38% from last year. Stocks as of May 3 were 22.468 million barrels down 1% from last week and up 2.29% versus last year. Cumulative corn usage for ethanol is 3.71 billion bushels. Weekly corn usage will need to average 104.58 million bushels to meet USDA's estimate of 5.5 billion bushels.

Northern Corn Belt states of Minnesota through Michigan look to experience continued rainfall over the weekend. Eight-to-14-day forecasts show cooler and drier conditions for this area, which is well behind normal planting progress.

Soybeans

Soybean futures were under pressure all week as optimism was low that talks with China will go well enough to keep tariffs from becoming the main headlines in future news articles. Farmers continue to be the pawn in this game of chess, and it is killing the grain commodities.

The U.S. increased tariffs from 10% to 25% on $200 billion of goods on China early Friday, May 10. Trump is also floating the possibility of adding a new 25% duty on another $325 billion of imports not already covered.

This all started after it was speculated on May 3 that China returned a 150-page draft trade agreement, and according to Reuter sources, the document was riddled with reversals by China that undermined core U.S. demands. U.S. negotiators and Trump didn't take the news too kindly and threatened to put on this latest round of tariffs a few days later. China has threatened that they would retaliate in full.

The U.S. and China are still talking as of May 10, but there is no guarantee ag product sales to China will start right away even if an agreement is reached. If an agreement isn't reached, Trump suggested there could be further assistance for American farmers, in which increased tariffs collected by the U.S. would be used to buy domestic agricultural products that would then be shipped overseas in the form of humanitarian aid.

There is not much positive news in the marketplace at the moment. Export sales were a net negative for this past week, and spring weather seems to be favoring an increase in soybean acres from what was originally planned. Another bumper crop in South America will keep global supplies flush for a year barring a disaster in the U.S.

U.S.-Chinese negotiations are the only thing that matters for soybean prices; not one other thing seems to matter. It is interesting and frustrating to read different takes on what is happening ahead of deadlines to put on additional tariffs. When you get the two largest economies negotiating at trade policy for years to come, I can't imagine anything more complicated than this — especially when you are dealing with a communist country. When market pressing news like this is happening at such a fast pace, keeping up with the national news is a must to make decisions regarding the markets.

The funds added to their short positions this past week and have set a new record for short contracts for the second consecutive week. The managed funds added 19,000 net short positions and were 149,000 contracts net short as of April 30. They surpassed the old managed fund soy short record of 119,000 contracts posted on June 27, 2017.

For the week ending May 2, USDA reported a net cancellation of 5.5 million bushels of soybean export sales for 2018-19 and an increase of 10.9 million bushels for 2019-20. Soybean export commitments now total 1.653 billion bushels in 2018-19 and are down 18% from a year ago. Export inspections for 2018-19 now total 1.182 billion bushels, down 27% from the previous year.

November soybeans broke through the contract low of $8.3975 on May 6. The contract low of $8.30 that was set May 9 is new support. The front month low of $8.065 on May 8 is the lowest futures price we have seen since December 2008. There is a gap that needs to get filled between $8.56 and $8.62 on the way down that should give this market support. The technical charts are a mess, but major resistance if we get a trade deal done is looking like $9.3125 on the weekly charts. On the daily charts, resistance is $9.34 and then the 10-month high of $9.71 for new crop soybeans that was set on Dec. 12. November soybeans were down 28.5 cents for the week as of May 9.

Canola

For the week ending May 9, July canola futures were up $4.10 to $436.70 Canadian per metric ton. The April Canadian dollar was at 0.7411. This brings the U.S. price to $14.74 per hundredweight.

• Velva, N.D., $14.81 per hundredweight, June at $14.30.

• Enderlin, N.D. $15.21 per hundredweight, June at $14.91.

• Hallock, Minn., $15.08 per hundredweight, June at $14.58.

• Fargo, N.D., $0 per hundredweight. Bids beginning May 17 are at $15.25.

Stats Canada says Canada's canola stocks are at 441.8 million bushels (up 14% from a year ago)

Barley

Cash feed barley bids in Minneapolis were at $3.25, while malting barley received no quote. Berthold, N.D., bid is $2.50 and CHS Southwest New Salem, N.D., bid is $2.55.

Durum

Cash bids for milling quality durum are $4.50 in Berthold and at $4.55 in Dickinson, N.D.

Sunflower

Cash sunflower bids in Fargo were at $17.10. June bids were at $17.25.

For the week ending May 9, soybean oil was down 72 cents at $26.63 on the July contract. Soybean oil has been down 15 of the last 19 trading days and have lost $2.72 in the past month and has lost close to $5 in the past three months since the swine flu has become big news.

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