Spread on Chicago and Kansas City wheat widens
The wheat markets were generally lower on the week with the exception of Chicago as spreading became the main feature. The funds are apparently buying Chicago and selling the Kansas City spread on anticipation of further declines to the soft red crop production estimates. The previous wide point of the spread was about 72 cents before narrowing to about 55 but now it has widened further to 80 cents.
The sour tone started with Egypt tendering for wheat with no U.S. wheat being offered. Ukraine and Russia were the lowest bids.
European Union wheat estimates are showing better than expected yields. France, Germany, England and Poland are estimated to see 8.7% to 14% or higher yields than 2018. France increased its soft red wheat harvest estimate to 38.2 million metric tons, which if realized would be 12% higher than last year. Matif Wheat futures had a dismal week on these estimates breaking major support of $173 per metric ton in the September contract.
The U.S. dollar backed off this week from $98 levels to the $97.45 range. The USDA ag attache in Argentina increased the Argentina wheat crop estimate to 22.2 million metric tons vs. USDA's current estimate of 21.4 million metric tons.
Weekly export sales were at the top end of market expectations at 488,000 metric tons (17.9 million bushels). Wheat export commitments now total 345 million bushels for 2019-20 and are running 25% ahead of last year. Weekly inspections totaled 395,000 metric tons (14.5 million bushels) and were also within expectations. Inspections now total 154.9 million bushels vs. USDA's export target of 950 million bushels.
Spring wheat conditions remained unchanged at 73% good to excellent. Trade was expecting 72%. Spring wheat harvest is just underway at 2% complete vs. 14% for the five-year average. Winter wheat is 82% harvested vs. 92% average.
Average estimates are out for the Aug.12. Currently, spring wheat is expected to come in at 571 million bushels. Hard red winter average is 806 million bushels and soft red is 258 million bushels. The all wheat average estimate is 1.926 billion bushels, putting average U.S. carryout at 995 million bushels. World estimates average 275.0 million metric tons for 2018/19 and 284.5 million metric tons for 2019/20.
For the week ending Aug. 8, September contracts for Minneapolis wheat were down 1.75 cents at $5.205, up 7.75 cents at $4.985 for Chicago wheat, and down 3.25 cents at $4.185 for Kansas City wheat.
Corn started the week with a wild session in Aug. 5 trade and trended higher the rest of the week. Corn condition ratings declined 1% to 57% good to excellent as trade was expecting. Corn silking is 78% compared to 93% for the five-year average. Corn in the dough stage is 23% compared to 42% average.
Weekly export sales continued their absolutely abysmal pace with only 43,000 metric tons (1.7 million bushels) of bookings for 2019/20. Sales over the last five weeks have averaged only 2.7 million bushels per week. To put it in perspective, new crop sales last year at this time were 308 million bushels compared to 160 million bushels currently. Weekly export inspections were at the low end of expectations at 631,000 metric tons (24.9 million bushels). Yearly exports will wrap up the end of August and there is still a risk that the USDA will revise lower its export projection.
French corn crop conditions declined yet again by 6% to 61% good or excellent as Europe experienced a heat wave over the past couple weeks.
CONAB increased Brazil's second corn crop estimate from 72.4 million metric tons to 73.1 million metric tons. This is a staggering 19.5 million metric tons higher than last year's 53.9 million metric tons. This would bring their total crop production to 99.3 million metric tons vs. 80.7 million metric tons last year. CONAB also raised the export number to 34.5 million metric tons compared to 23.8 million metric tons last year. The U.S. ag attache in Argentina sees corn exports at 34 million metric tons vs. 22.5 million metric tons last year.
Ethanol production for the week ending Aug. 2 was 7.28 million barrels. This was up 0.87% vs. last week and down 5.45% vs. last year. Stocks were 23.117 million barrels, down 5.52% vs. last week and up 0.85% vs. last year. U.S. calendar year gasoline demand is running 0.3% less than last year. Crude oil, gasoline and distillate stocks all rose much more than expected this past week which led to sharp declines in those markets in Aug. 7 trade.
Estimates are coming out for the August crop report. The USDA usually finds more bushels laying around from the previous year and rolls them into new crop carryover. I think this will be the case for corn as exports and ethanol grind have slowed over the summer months.
The bigger question is where the acreage and yield will fall? So far the average trade guess is 164.7 bushel per acre yield and 87.7 million planted acres. This would equate to 13.12 billion bushels of production vs. USDA's current estimate of 13.87 billion bushels and a 14.1% stocks to use ratio for 2019/20.
This report will be anything but boring as the high and low estimates vary greatly.
Soybean futures saw a choppy trade this week but ended up seeing some gains Midweek. Rains have been slow coming for much of the eastern Corn Belt and this may be catching the trade's attention. There had been a lack of weather-related issues in the past month to get this market worried about a large shortfall.
Weather largely shaped up in July and the start of August, but there are areas starting to show issues of dryness in Illinois, Indiana, Ohio and the northern part of Missouri.
This crop is also still plenty behind as you can see in the blooming and setting pods. As of Aug. 4, soybeans blooming came in a 72% vs 91% last year and 87% for the five-year average. Soybeans setting pods came in at 37% vs 73% last year and 63% for the five-year average.
Soybean crop conditions as of Aug. 4 were unchanged at 54% good to excellent from the week prior and compared to 67% good to excellent last year. Average analyst estimates were expecting unchanged or a decrease of 1% ratings. The crop is also rated 33% fair and 13% poor to very poor.
The trade continues to dislike the escalating tensions between the U.S. and China as jabs continue to get thrown at each other. China has halted its purchases of U.S. agricultural products and will not rule out levying import tariffs on American farm imports purchased after Aug. 3, the Chinese Commerce Ministry said early on Tuesday in China. The moves by China represent the latest escalation in its trade war with the U.S. after President Donald Trump slapped on additional tariffs last week.
There was another coal thrown on the fire this past week as the U.S. Treasury took the rare step of labeling China a currency manipulator as their currency fell to a 10-year low. Of course China strongly denies this manipulation and is saying it is all in the market's control. The thing about that is roughly 2/3rds of the Chinese economy is state owned.
A deal between the two superpowers seems to be as far away from happening as it ever has been since the trade war started. Weekly U.S. export inspections were respectable this past week, but weekly export sales were poor.
November soybeans were within 4 cents from filling a trade gap that was made in May. This was and still is first support as the bottom end of the gap was left in November soybean futures at $8.58 - $8.645 on May 25. The November contract low of $8.155 set on May 13 is major support after this.
Major resistance is at $9.3125 on the weekly chart. On the daily charts, resistance is $9.365 and then the five-month high of $9.48 for new crop soybeans that was set on June 18th.
For the week ending Aug. 8, November canola was up $7.40 and is at $452.2 per metric ton Canadian. The Canadian dollar was up .0048 at 0.7560. This brings the U.S. price to $15.51 per hundredweight U.S.
Velva, N.D., $14.29 / hundredweight, September at $14.29
Enderlin, N.D., no bid, September at $14.29
Hallock, Minn, $14.65 / hundredweight, September at $14.82
Fargo, ND, $14.60 / hundredweight, September at $14.25
Cash feed barley bids in Minneapolis were at $3.00, while
malting barley received no quote. Berthold, N.D., bid is $2.75 and
CHS Southwest New Salem, N.D., had no cash bid
Cash bids for milling quality durum are $4.70 in Berthold and at $4.70 in Dickinson.
Cash sunflower bids in Fargo were at $18; October at $17.10
For the week ending Aug. 8, soybean oil was up 69 cents at $29.01 on the September contract.