Delayed harvest narrowing nearby basis
The U.S. dollar trended lower to the $97.30 area December after breaking $98 support in Oct. 16 trade. World values have been increasing with the continued uptrend in Matif wheat futures to over $180 per metric ton. Thoughts of declining production in Australia, Argentina and North America were also supportive to the wheat complex this week.
Egypt's General Authority For Supply Commodities purchased 405,000 metric tons of Russian, French and Ukrainian wheat. What the trade viewed as favorable was that Egypt purchased this wheat for $6 to $9 a metric ton higher than the previous week. Egypt is pretty notorious for waiting it out for prices to decline, so it fueled sentiments about declining production thoughts in other areas of the world. Saudi Arabia also tendered for 600,000 metric tons of wheat which is expected to also come out of the Black Sea Region. There was another report out stating that Vietnam halted Russian wheat exports with analysts thinking it was from poor quality.
Strategie Grains increased its estimate for the European Union soft red crop 1 million metric tons to 145.5 million metric tons. They also increased the European Union soft red export estimate 1.6 million metric tons to 27.3 million metric tons. Russian agricultural consultancy IKAR revised a slightly higher Russian wheat crop to 75.6 million metric tons versus U.S. Department of Agriculture at 72.5 million metric tons. SovEcon estimates Russian wheat exports through October at 15.4 million metric tons versus 17.5 million metric tons last year.
Weekly export inspections were within expectations at 17 million bushels. Cumulative exports of 348 million bushels are up 21% from last year. A private analyst increased the Ukraine wheat crop to 27.9 million metric tons versus 27.5 million metric tons.
Spring wheat harvested is 94% harvested compared to 91% last week, so 6% of wheat acres will likely be abandoned after the October snowfall. Winter wheat plantings are 65% which is right at the five-year average. Winter wheat emerged is 41% compared to 40% average.
Canadian crop reports continue to show lagging harvest progress. As of Oct. 8, spring wheat harvest in Manitoba was 95% complete versus 100% average. Saskatchewan was 52% harvested. Their weighted major crop index was 47% harvested versus 82% average. Alberta was 48.3% harvested. Alberta's weighted major crop index shows 44.8% harvested versus 67.7% average.
Two-thirds of the Australian wheat belt remains dry with some showers limited to the extreme southeast this week. Western areas remain dry with slight chances in the 16 to 30 day which could help later planted wheat. Argentina shows greater chances of rain in the 11 to 15 day forecast for two-thirds of its wheat area which has also been on the dry side.
Minneapolis traded to $5.58 in Oct. 17 trade before reversing downward. $5.325 is current support for Minneapolis December with resistance at $5.59. For the week ending Oct. 17, December contracts for Minneapolis wheat were up 2 cents at $5.50, up 17.5 cents at $5.255 for Chicago wheat, and up 11.75 cents at $4.3125 for Kansas City wheat.
The corn market started off the week higher on news that the U.S. and China had reached a tentative trade agreement. This helped December corn reach $4.025 in Sunday night trade. The market backed off on follow up reports stating that the trade wanted more confirmation of the agreement. Resistance in the $4.01 to $4.02 December area held firm after poor weekly export inspections. Inspections were only 18.5 million bushels and are running 64% behind last year's pace.
On Oct. 11, during the northern blizzard, the Cargill high fructose corn processing plant in Wahpeton, N.D., went to a zero basis. This was up from -45 the previous Friday. Cargill bid -20 on Oct. 7 and -15 Oct. 8-10. This narrowing basis points to a short-term pinch for corn in the northern region as harvest is delayed with wet corn. The Hankinson, N.D., ethanol plant in that area followed suit and was also bidding a zero basis.
A private forecaster estimates a 250 million bushel loss to corn production in North Dakota as a result of last week's blizzard event. This points to further narrowing of basis levels in the region as we have witnessed with processing and ethanol plants in southeast North Dakota this past week.
I guess we will find out how much old crop corn is laying around with that kind of a firming basis. We will know the answer soon, as it's unlikely farmers will be in the field in that area for at least another week. It doesn't appear that there is much laying around if they are narrowing basis bids like this. Farmers had to get the lenders off their back this spring. June gave them that opportunity and I think most of them took it. But for the end-users, the assumption of getting corn automatically by mid-October ended up being a bad assumption in 2019.
U.S. corn conditions were 55% good to excellent, the same level as expected. North Dakota saw a dramatic 9% decline in ratings as a result of the unusually early winter storm. Corn harvest is at 22% complete versus 24% expected and 36% average. The 2019 corn crop continues to be the slowest maturing on record at 73% versus 92% average. This is still behind the 2009 crop average at this time of 77% mature.
The corn market backed off in Oct. 16 trade on EPA language regarding small refinery waivers. It was thought that the EPA would use a three-year rolling average of past exemptions when determining RFS blend obligations. The EPA language stated they will use estimated future small refinery exemptions when determining how many gallons to blend. There is a 30-day comment period before the rule is finalized.
The corn market then received a boost with the announcement of a 228,660 metric ton sale of corn to Mexico in Oct. 17 trade. For now, the market needs to crack $4.02 December to continue the uptrend and seems well supported in the $3.85 area.
Soybean futures were not able to trade to the next tier higher this week despite some favorable fundamental news. The USDA reported a small sale of 5.24 million bushels to unknown to start off the week, but it wasn't enough to give the soybean market a boost. It was also disappointing that there was not more follow through sales to China after the partial trade deal that was negotiated but not yet finalized. The trade was looking for more details over the weekend about what they actually agreed upon, but the news wire was quiet over the weekend after the U.S.-China talks. A lack of U.S. yield data may be holding prices in a range and could stay there until the USDA updates yields and production Nov. 8.
Brazil's and Argentina's dry areas are shrinking as they are expecting decent rains as we get to month's end. Remember some main growing areas in Brazil delayed planting a few weeks ago until seasonal rains fall.
As of Oct. 13, soybeans dropping leaves were well behind pace at 85% versus 93% for the five-year average and 94% last year. Soybeans dropping leaves was at 72% last week. Soybeans dropping leaves were at 92% in Minnesota, 92% in South Dakota, 96% in North Dakota, 91% in Nebraska, and 85% in Iowa. Kansas at 81% dropping leaves means the second cropping soybeans acres likely got smoked. The percent that has yet to start dropping leaves most likely got stung by the freeze event this past weekend; the question is how close they were to full maturity. The USDA said they will resurvey farmers in North Dakota and Minnesota to see if this winter weather will affect harvested acres.
Substantial moisture and snowfall covered much of North Dakota's soybean growing areas which could make for an interesting harvest the rest of the fall. Freezing temperatures also hit a large area of the Upper Midwest. Most of the Dakotas, Nebraska, Iowa and Minnesota had freezing for over a five hour period, which should end the growing season for those areas. Parts of Wisconsin, Missouri, Illinois and Indiana had areas that looked to have also been nipped by frost.
As of Oct. 13, soybeans harvested was at 26% complete versus 49% for the five-year average and 37% last year. Crop ratings were raised 1% to 54% good to excellent compared to 66% good to excellent last year. The crop is rated 32% fair and 14% poor.
Soybeans also trended lower after the first National Oilseeds Processors Association crush report of the marketing year came out disappointing. NOPA's September soybean crush report reflected soybean crush activity well below market expectations, down sharply from August and down from year ago levels. Soybean oil stocks were above expectations.
On the daily charts, resistance is $9.45, which was set on Oct. 14 and then the five-month high of $9.48 for new crop soybeans that was set June 18. November soybeans broke through major resistance at $9.3125 on the weekly chart. On the weekly charts there is not much resistance after this below $10.
First support is $8.80 that was set in the middle of September and then $8.525 that was the recent low set on Aug. 28. The November contract low of $8.155 set on May 13 recovery is major support after this.
For the week ending Oct. 17, November canola futures were down $3.10 to $457 Canadian. The Canadian dollar was at .7614. This brings the U.S. price to $15.79 per hundredweight.
• Velva, N.D., $14.63 per hundredweight, November at $14.84.
• Enderlin, N.D., no bids.
• Hallock, Minn., $14.58 per hundredweight, November at $15.10.
• Fargo, N.D., $15.20 per hundredweight, November at $15.05.
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, N.D., is $3.
Cash bids for milling quality durum are $6 in Berthold and at $6.25 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $18.60. November bids were at $17.40.
For the week ending Oct. 17, soybean oil was down 40 cents at $30.68 on the December contract.