Lack of harvest data keeping futures stagnant
The wheat market was on the defensive this week as much of Oklahoma received 0.5 to 1.5 inches of rain over the past weekend. Much of the soft red belt received 1 to 2 inches of rainfall in the same period.
The first winter wheat ratings of the season show the crop off to a good start with adequate moisture. Overall combined hard red and soft red ratings are 56% good to excellent, 31% fair and 13% poor to very poor. This compares closely to 53% good to excellent, 33% fair and 14% poor to very poor to begin the season last year. Ratings are slightly higher than both the five- and 10-year averages. Winter wheat is 63% emerged versus 64% average. Planting pace is at at 85% compared to 82% normal.
Canadian crop reports show good wheat harvest progress last week. Saskatchewan is now 84% harvested versus 66% last week. Alberta is 76.5% harvested versus 62% last week.
Weekly export sales were at the very top end of expectations at 494,000 metric tons (18.1 million bushels). Total commitments of 536 million bushels are running 11% ahead of last year's pace. Weekly export inspections were at the lower end of expectations coming in at 523,000 metric tons (19.2 million bushels). Cumulative exports of 390 million bushels are running 23% ahead of last year's pace.
Egypt purchased wheat split between Ukraine, France and Romania. The purchase was roughly $5 per metric ton higher than a mid-October purchase. Russian wheat was not in this purchase as their prices have increased 12% in the last six weeks. A Russian ag official stated that Russian farmers are building more storage capacity after favorable crops and good income.
Vietnam suspended Russian wheat due to foreign material, namely thistle seed, and according to an article by Reuters, it now appears they will use Argentina as an annual supplier of 2 million metric tons. Russia provided Vietnam a list of its wheat exporters for approval in a last ditch effort not to lose the business. Last month, Vietnam had rejected a Russian wheat cargo over foreign material.
Both the six-to10- and eight-to-14-day forecasts show much colder than normal temperatures for the soft red belt. The colder than normal temperatures are also forecast to stretch into southern Oklahoma and northern Texas.
Current support for Minneapolis December is $5.18 with resistance at $5.42. For the week ending Oct. 31, December contracts for Minneapolis wheat were down 12.75 cents at $5.24, down 9 cents at $5.0875 for Chicago wheat, and down 3 cents at $4.1975 for Kansas City wheat.
The corn market traded in a narrow range this week with continued poor weekly export numbers keeping a lid on prices; $3.81 held as support but $3.91 held as resistance.
Export inspections were below expectations coming in at 381,000 metric tons (15 million bushels). Mexico took 40% of that small total, showing you just how nonexistent sales are out of the Northern Hemisphere. Cumulative exports of 137 million bushels are down 60% from last year's pace. According to RJO Brien research, this is the lowest U.S. eight-week total corn export number to start the marketing year in over 40 years. Weekly export sales of 549,000 metric tons (21.6 million bushels) were in line with expectations. Total commitments are down 48% from last year's pace.
Corn conditions improved 2% to 58% good to excellent. Corn harvest is at 41% complete versus the five-year average of 61%. Trade was expecting 46-48%. The U.S. corn crop is 93% rated as mature. Michigan, North Dakota and Wisconsin still have over 23% of their corn remaining to reach maturity.
Weekly ethanol production numbers were up slightly to 7.028 million barrels, 0.8% higher than last week, reflecting the fifth consecutive weekly increase. This was, however, 5.19% lower than last year's same week total. This was also the lowest last week of October total for the last four years. Ethanol stocks declined to 21.099 million barrels. This is down 1.24% versus last week and 7.24% versus last year. Ethanol margins have improved in the last few weeks which could encourage more production.
U.S. gasoline demand saw a 5.6% increase from the same week ago levels. Calendar year gasoline demand is running 0.2% higher than last year but the last six weeks have been running 3.2% more than the year prior. This has favored Reformulated Gasoline Blendstock for Oxygen Blending gasoline futures trending higher. Weekly gasoline stocks declined more than expected to 220.06 million barrels while crude oil stocks were much higher than expected at 438.85 million barrels.
EPA public hearings and congressional hearings were held this week regarding the small refinery exemptions to the Renewable Fuels Standard. According to a Reuters article, Iowa Ag Secretary Mike Naig stated there is a "growing sense of frustration in the Heartland." American Petroleum spokesperson Patrick Kelly was on record stating that the new proposal "punishes the companies already complying with the nations biofuel law."
Valero's ethanol segment reported a $43 million dollar loss in the third quarter. This compares to a $21 million profit for the same period in 2018. The reason stated for the loss was higher corn prices. The renewable diesel segment reported $65 million in profit for the third quarter compared to a $5 million loss in the third quarter of 2018. Ethanol production was 1.5% less than the third quarter of 2018.
U.S. corn harvest is running about 20% behind normal pace with a system dumping 2 to 7 inches of snow on a line from northern Missouri to northwest Indiana in the next few days. The northern third of Illinois looks to have the greatest chance of higher accumulations. Both the six-to-10- and eight-to-14-day forecasts show much below normal temperatures for a vast majority of the Corn Belt for Nov. 6-14. Moisture chances are greater on a line from the Dakotas to Michigan during this timeframe.
Soybean futures continue to lull around as the trade seems to be in pause mode until the U.S. Department of Agriculture updates its numbers in the World Agricultural Supply and Demand Estimates report on Nov. 8. No concrete details and more rumors surrounding the U.S.-China phase one signing is also keeping the trade in defensive mode. It was initially reported that the U.S. and China were planning on signing phase one in Chile on Nov. 17. Chile canceled hosting the summit where the U.S. and China were planning on meeting because of political unrest and protests that have plagued the country the last month.
The White House still expects to sign an initial trade agreement with China next month despite the cancellation of the APEC summit in Chile. Chinese officials are coming out and saying they aren't as optimistic. There are U.S. officials that are also saying don't be surprised if phase one isn't ready to be signed by then. They are also saying that if it wasn't signed by that deadline, not to panic and it wouldn't be because talks broke down, but because they were still ironing out details and the deal wasn't quite ready to be signed.
The Fed lowered its benchmark funds rate by 25 basis points (as expected) to a range of 1.5% to 1.75%. The Fed indicates it may pause rate cuts from here. This was the third 0.25% cut this year.
AgRural estimates that Brazil's soybean planting was 35% planted as of Oct. 24. The progress is behind last year's record pace of 46% but it is ahead of the five-year average pace. Forecasts remains on the dry side for south-central Brazil where more rain is needed, while southern Brazil is expecting heavy rains.
As of Oct. 27, soybeans dropping leaves was at 97% versus 99% for the five-year average and 100% last year. Soybeans dropping leaves was at 94% last week. Soybeans harvested was 62% complete versus 78% for the five-year average and 69% last year. The trade was expecting 64-65% harvested. The week prior the U.S. was at 46% harvested. Expect a large uptick in harvested acres in the Nov. 4 report as many acres saw little to no precipitation this past week.
On the daily charts, resistance is $9.48, which was set on eight-month high set June 18. On the weekly charts there is not much resistance after $9.48 below $10 and major resistance is in the $10.50 to $10.70 area.
First support is $8.80 that was set in the middle of September and then $8.525 which was the recent low set on Aug. 28. The November contract low of $8.155 set May 13 is major support after this.
For the week ending Oct. 31, January canola futures were down $6 Canadian to $457.40. The Canadian dollar was at .7596. This brings the U.S. price to $15.76 per hundredweight.
• Velva, N.D., $14.71 per hundredweight, December at $14.88.
• Enderlin, N.D., $15.68 per hundredweight, December at $15.57.
• Hallock, Minn., $14.32 per hundredweight, December at $15.11.
• Fargo, N.D., $15.65 per hundredweight, December at $15.65.
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 $6.50 in Berthold and at $6.25 in Dickinson.
Cash sunflower bids in Fargo were at $18.15. Dec $17.45.
For the week ending Oct. 31, soybean oil was down 21 cents at $30.75 on the December contract.