The wheat market continued its slow downward bleed as harvest pressure pushed Minneapolis contracts to new lows each day this week despite respectable export pace.
Matif wheat futures matched their recent contract low of $165.50 per metric ton September. The U.S. dollar resumed its uptrend from a weekly low of $97.37 to the $98.39 level. The Canadian dollar showed a downside reversal in Aug. 27 trade, but seems supported at the .7500 level. If it breaks under .7500, this will give Canadian spring wheat exports a leg up on the U.S.
Black Sea wheat prices fell $3 per metric ton last week to $190 per metric ton late last week according to IKAR. The Russian ruble trended lower to near contract lows. French wheat was the lowest offer to Egypt, beating out Russian offers by $6 per metric ton. Egypt purchased 350,000 metric tons of wheat from Russia (230,000), Ukraine (60,000) and France (60,000).
AgriTel of France stated that France will export about 20 million metric tons of wheat this year, up 3 million metric tons from the previous year. AgriTel also estimates Russian and Ukrainian wheat production 1.2 million metric tons higher than the U.S. Department of Agriculture's current estimate. Australian wheat crop estimates have declined to the 18 million to 19 million metric tons range versus USDA's current estimate of 21 million metric tons.
Weekly export sales continue their good pace at 662,000 metric tons (24.3 million bushels) which was a marketing year high. Over the last six weeks, wheat sales have averaged 19.8 million bushels compared to 15.6 million bushels for the same period last year. Total 2019-20 commitments are at 407 million bushels, up 24% from a year ago. South Korea and Mexico were the largest buyers this week. Weekly inspections were in line with expectations at 18.1 million bushels (493,000 metric tons). Inspections now total 221 million bushels, 24% ahead of last year's pace.
Stats Canada's Production of Principle Field Crops report showed all wheat production at 31.251 million metric tons with trade expecting 32.3 million metric tons. This compares to 31.7 million metric tons in 2018. However, in breaking out the numbers, spring wheat production increased to 25.1 million metric tons from 23.9 million metric tons in 2018, a 4.9% increase. This is the second highest spring wheat production since 1992-93. Winter wheat production was down 31.4% at 1.72 million metric tons, and durum production was down 23% at 4.42 million metric tons compared to 2018. Oats production increased 15% to 3.95 million metric tons.
Spring wheat conditions declined 1% to 69% good to excellent with trade expecting a steady rating from last week at 70%. Spring wheat harvest is 38% complete compared to 65% normally. Cooler and wetter weather is forecast for the northern spring wheat belt over the next two weeks.
For the week ending Aug. 29, September contracts for Minneapolis wheat were down 19.25 cents at $4.795, down 5.5 cents at $4.6975 for Chicago wheat, and down 4.25 cents at $3.8725 for Kansas City wheat.
Corn saw a key reversal on Aug. 28 as corn futures saw a lower low than the day before and a higher close than the prior day's high. Corn futures are still sharply oversold and got within 0.5 cents of the December contract lows that were set May 13 at $3.6375. Corn futures were able to push back down to contract lows as delayed pricing contracts needed to be priced the past two weeks and many elevators will not allow a roll into the new crop contract. The typical seasonal low came at the end of August again this year, which surprised many people that it was able to happen again with the late planting issues we saw this spring. This next month may see plenty of volatility as the trade will monitor Midwest temperatures more than they ever have at this time of year.
Needed rains fell in much of the Midwest this past week and shrunk the dry areas to less than 15% of the Midwest. Timely rains fell in August just like the past two years, which helped yields once again, especially with this late planted crop. Temperatures are cool across the Midwest, but the trade does not seem concerned about frost or maturity yet. They are in a prove-it mode and need to be shown that this crop isn't going to make it to full maturity. The Dakotas, Minnesota, and the northern halves of Nebraska, Wisconsin and Michigan are the states that see an average frost date in the end of September. The other Midwest state typically don't see the first frost until October.
This year's corn crop is 21% behind the average in the dent category and 29% of the U.S. crop is not even at dough stage yet. The trade does not seem concerned yet, though, as September forecasts are not as cool compared to the below average temps we saw in August.
As of Aug. 25, corn conditions were increased 1% to 57% good to excellent, in line with the trade's expectations. The crop is rated 30% fair, and 13% is rated poor to very poor. Corn dough is at 71% versus the five-year average of 87% and 91% last year. Corn dented is at 27% versus the five-year average of 46% and 59% last year.
Corn got a boost midweek from some comments by Agriculture Secretary Sonny Perdue. Reuters reported that U.S. President Donald Trump will announce a plan to boost demand for biofuels within weeks, Perdue said on Aug. 28 at The Farm Progress Show in Illinois. This comes from farmer blowback after the Environmental Protection Agency announced that it accepted a record high 31 small refinery waivers a few weeks ago. But before the trade gets too excited, they will want to know the details of what Trump and the White House have come up with to help ethanol demand.
It was also being reported that the U.S. and Japan have reached the framework for a trade agreement. It is rumored that it matches tariff levels of Trans Pacific Partnership, which helps us compete with other countries. Japan is also reportedly increasing its ag purchases from the U.S., but it remains to be seen what this means.
The managed funds sold off heavily the last two weeks and are now net short. The funds went from 45,000 contracts net positive to 56,000 net short, a huge position change for one week. Open interest has declined 146,300 contracts in the last four trading sessions.
Soybeans saw a nice reversal this week as short covering came into the market. November soybeans tested the two and a half month low on Aug. 18 and was trading below it by 2 cents for a short time. We saw a nice bounce back after testing this recent low of $8.545 that was set on Aug. 5.
As of Aug. 25, 21% of the U.S. soybeans still haven't set a pod, which is more than 16 million acres. By Aug. 25, 6% of the nation's soybeans weren't even blooming. Crop ratings increased 2% to 55% good to excellent compared to 66% last year. The crop is rated 32% fair and 13% is rated poor. Average analyst estimates were expecting an increase of 1%.
Last week's rains across the Midwest gave much of the crop a needed drink and really increased crop conditions where they were getting dry. (Illinois, Missouri, and Kansas saw large improvements.) This crop is well behind and the first frost date may be the most important thing going forward for prices.
Trump announced this past week that they are back in communication with China, but confirmation was spotty. This comes after both countries threatened to throw additional tariffs on each other late last week starting Sept. 1. China has bought very few soybeans from the U.S. this past year, so what does it matter if they throw additional tariffs on something they aren't buying anyway. It is still amazing that the trade continues to trade these rumors as the two superpowers have been playing cat and mouse for well over a year, and there looks to be no end in sight.
U.S. Gulf bids for soybeans are close to $1 cheaper than port bids from Brazil. If you are a global end user for soybeans, why would you buy from anywhere else unless you are China? China supposedly has a full ban on U.S. soybean purchases, so those Brazilian farmers are having a heyday at U.S. farmers' expense. The Brazilian farmers are also enjoying their cheaper currency that has been under heavy pressure, which is the opposite of what U.S. farmers are dealing with when it comes to currency led exports.
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 18. November soybeans are still trending downward and filled the trade gap that was made in May. This gap was at $8.58 to $8.645 set on May 25. New support is $8.525 that was the recent low set on Aug. 28. The November contract low of $8.155 set May 13 recovery is major support after this.
For the week ending Aug. 29, November canola was down 2.40 at $447.50 Canadian per metric ton. The Canadian dollar was down .0004 at 0.7521. This brings the U.S. price to $15.27 per hundredweight.
• Velva, N,D., $14.06 per hundredweight, September at $14.06.
• Enderlin, N.D., no bid, September at $14.06.
• Hallock, Minn., $14.25 per hundredweight, September at $14.42.
• Fargo, N.D., $14.35 per hundredweight, September at $14.30.
Stats Canada estimates canola production at 18.453 million metric tons below average trade guesses of 18.9 million metric tons, 9.3% lower than 2018.
Cash feed barley bids in Minneapolis were at $2.50, while malting barley received no quote. Berthold, N.D., bid is $2.75 and CHS Southwest New Salem has no bid.
Stats Canada estimates barley production at 9.644 million metric tons, 15.1% higher than 2018.
Cash bids for milling quality durum are $4.50 in Berthold and at $4.60 in Dickinson, N.D.
Stats Canada estimates durum production at 4.42 million metric tons, 23.1% less than 2018.
Cash sunflower bids in Fargo were at $18.55. October bids were at $17.40.
For the week ending Aug. 29, soybean oil was up 3 cents at $28.37 on the September contract.