August not bringing the heat to help crops mature
Matif wheat futures hit a 16-month low at $165 per metric ton for September. The Russian ruble reached a six-month low, which is pushing Matif futures lower to give Europe a better shot at exports versus Russia.
Essentially, it's been a race to the bottom the past month for the lowest offers despite lower Russian export and yield estimates. SovEcon estimates Russian wheat exports for July and August at 6.5 million metric tons, 25% below last year's brisk pace. The U.S. dollar traded sideways in a narrow range for the week between at $98 to $98.25.
The good news is U.S. wheat exports have maintained a respectable pace. Weekly export sales were above expectations at 595,000 metric tons (21.8 million bushels) and were the highest total in four weeks. Total commitments of 383 million bushels are 22% ahead of last year. This week's activity was nearly all to western hemisphere destinations. Weekly export inspections were inline with expectations at 489,000 metric tons (18 million bushels). Inspections for 2019-20 now total 200.1 million bushels, 25% better than last year. Year-to-date U.S. wheat exports are running 1.5 million metric tons ahead of last year.
The U.S. ag attache in Canada estimates Canadian wheat production at 32.7 million metric tons, up from 31.8 million metric tons last year. The official estimates Canadian wheat exports at 24.4 million metric tons versus 24.5 million metric tons last year. Bulgaria is estimating a 6.1 million metric tons to 6.6 million metric tons wheat crop. The record yield was 6.3 million metric tons in 2017. Ukraine is estimating a large increase in wheat exports this year to 21 million metric tons versus 15.5 million metric tons last year. They are stating that old crop supplies are 1.6 million metric tons higher than the U.S. Department of Agriculture's. Ukraine is also estimating grain harvest up 2.9 million metric tons. France AgriMer stated 89% of the French soft wheat crop will be 11% or higher meeting international standards; 20% of the crop will be 12% or higher protein compared to 47% last year.
Spring wheat conditions improved 1% to 70% good to excellent; 16% of the crop is harvested compared to 49% average.
Latest Commodity Futures Trading Commission data shows funds net short in the Kansas City (-33,000) and Minneapolis (-18,900) and net long 4,100 contracts in the Chicago market. The Minneapolis short is a new record.
Both the six-to-10- and eight-to-14-day forecasts show much below normal temperatures for the northern spring wheat belt. Short term one-to-five day forecasts favor 1 to 2 inch rains in eastern North Dakota and northwestern Minnesota as harvest is just beginning to kick into high gear.
We are at that late August timeframe when deferred payment contracts are due to be sold or rolled. We typically put in the "DP" low at this point of the year. The Kansas City contract seems to be forming a bottom. Minneapolis contracts failed to hold the $5 level in Aug. 22 trade primarily due to harvest pressure, but the bottom will be formed when the farmer surrenders his grain or pays money for the roll.
For the week ending Aug. 22, September contracts for Minneapolis wheat were down 7.75 cents at $4.985, down 10.25 cents at $4.6725 for Chicago wheat, and down 1 cent at $3.9325 for Kansas City wheat.
Corn futures were sideways to lower on the week with December coming within 2.5 cents of the mid May contract lows before recovering.
Pro Farmer estimates Illinois corn yield at 171.17 bushels per acre versus 188.95 bushels per acre for the tour's three-year average. USDA is estimating 175.66 bushels per acre. Indiana is estimated at 161.4 bushels per acre versus their three-year average of 175.66 bushels per acre and USDA's current estimate of 166 bushels per acre. Nebraska fared better as has been indicated by higher condition ratings throughout the growing season. Pro Farmer estimate is 172.5 bushels per acre versus 167.73 per bushel three-year tour average and USDA at 186 bushels per acre. South Dakota estimate is at 154.08 bushels per acre, versus 158.6 bushels per acre three-year average versus USDA at 157 bushels per acre for the state. Ohio is estimated at 154.35 bushels per acre versus 164.38 bushels per acre three-year average versus USDA's Ohio estimate of 160 bushels per acre.
There is a lot of talk about a lack of maturity on the Pro Farmer Tour, so I went back to the location I've been tracking this summer around the south-central North Dakota area. To date given an assumption of a May 17 planting date, Growing Degree Day Units on corn are tracking -155 units behind the last five-year average. I still use the 2004 year as the cold standard as we had a lot of immature corn that fall. This location is +214 units ahead of 2004, so that is the good news. The bad news is the last 15 days have shown a noticeable decline in daily GDD accumulation. We have not been above 20 units accumulated in a day since Aug. 6, and there are a lot of 11,12 and 13s, when generally August gives us just as many +20's as July does. The two-week forecast is calling for much below normal temps in the northern Corn Belt and I would suspect that by Labor Day, this area will not be much ahead of 2004. In 2004, we had a frost around Aug. 19 — so I think we avoided that potential catastrophe. The next full moon is Sept. 13, and I would expect a frost then which is normal for this area. We will have late planted corn that won't make maturity in this scenario.
Corn conditions declined 1% to 56% good to excellent. Corn at the dough stage is 55% compared to 76% for the five-year average. Corn dented is 15% versus 30% average. As of Aug. 18, 5%, or 4.5 million acres, of the U.S. corn crop had yet to silk.
POET in a press release announced the closure of an ethanol plant in Cloverdale, Ind., and consolidation among some of its plants that would curtail 100 million bushels of corn processed for ethanol. Reuters reported that President Donald Trump had a two-hour meeting with officials from the Department of Energy, Department of Agriculture and Environmental Protection Agency regarding ethanol waivers after receiving blowback from farm groups about the demand reduction for corn. The White House declined to comment.
Weekly export sales were on the low end of expectations at 4.7 million bushels for old crop and 11.9 million bushels for new crop. Old crop corn sales over the last few weeks have totaled only 26.9 million bushels versus 89.4 million bushels over the same period last year. New crop sales are running 184 million bushels versus 390 million bushels for the same period last year.
Eight-to-14-day forecasts show much below normal temperatures for the central and western Corn Belt, with precipitation chances greater for the southern and eastern Corn Belt. Shorter term weather forecasts favor rain in the southern Midwest through late week. Heavier rainfall chances in the next few days are in northeast Kansas, southwest Iowa and northwest Missouri.
Soybean futures struggled with pressure in the corn and wheat markets. Timely rains offset condition ratings and lower pod counts from the Pro Farmer Tour for price action. Another round of storms across the Midwest gave soybean plants a shot of needed rain in areas such as eastern Iowa, Illinois and Indiana. Just when they start drying up like the last couple years, they get timely rains to keep better yield potential. This doesn't help the markets out when the trade is typically looking for dry hot weather this time of year. A cooler-than-average August is keeping these plants from burning up, but what this crop needs is heat.
This crop is well behind on maturity and the first frost date may be the most important thing going forward for prices. As of Aug. 18, 32% of the U.S. soybeans still haven't set a pod, which is over 24 million acres. As of Aug. 18, 10% of the nation's soybeans weren't even blooming.
U.S. soybean demand continues to face an uphill battle as the U.S. dollar index is near two-year highs but the Brazilian real is near the bottom of its trading range. Argentina's currency is in the cellar as the country is in chaos. Political uncertainty is causing economic uncertainty after their recent primary election. The only thing poor currencies do is make South American soybeans cheaper to foreign buyers.
The Pro Farmer Tour took yield samples across the Midwest this week and pod counts are down. Nebraska and the western half of Iowa are looking good like normal, but the other states are well behind their average. The common theme across the tour was these crops need time, something every farmer already knows but maybe the trade will finally start to realize.
Day 1 soybean results from the Pro Farmer Tour:
• South Dakota pod count 833 versus 1,025 last year and 965 for three-year average.
• Down 19% versus last year and down 14% versus the three-year average.
• Ohio pod count 764 versus 1,248 last year and 1,137 for three-year average.
• Down 39% versus last year and down 33% versus three-year-average.
Day 2 soybean results from the Pro Farmer Tour:
• Indiana pod count 924 versus 1,312 last year and 1,220 for three-year-average.
• Down 19.5% from last year and down 24% three-year-average.
• Nebraska pod count 1,211 versus 1,299 last year and 1,218 for three-year-average.
• Down 7% versus last year and close to three-year-average.
Crop ratings as of Aug. 18 decreased 1% to 53% good to excellent, compared to 65% good to excellent last year. The crop is rated 33% fair and 14% poor. Average analyst estimates were expecting an increase of 1% to 2% ratings.
November soybeans are trending downwards and are at risk of 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 to $8.645 on May 25. The November contract low of $8.155 set on May 13 recovery 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 June 18.
For the week ending Aug. 22, November canola was up $0.70 and was at $453.10 Canadian per metric ton. The Canadian dollar was at 0.7521. This brings the U.S. price to $15.46 per hundredweight.
• Velva, N.D., $14.25 per hundredweight, September at $14.25.
• Enderlin, N.D., no bid, September at $14.25.
• Hallock, Minn., $14.44 per hundredweight, September at $14.60.
• Fargo, N.D., $14.65 per hundredweight, September at $14.45.
Cash feed barley bids in Minneapolis were at $3, while malting barley received no quote. Berthold, N.D., bid is $2.75 and CHS Southwest New Salem, N.D., gave no cash bid.
Cash bids for milling quality durum are $4.50 in Berthold, N.D., and at $4.60 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $18.55. October bids were at $17.40.
For the week ending Aug. 22, soybean oil was down 59 cents at $28.54 on the September contract.