Markets follow 'buy the rumor, sell the fact' rule
The wheat market experienced "buy the rumor, sell the fact" trading as temperatures plunged to record lows in a number of locations across the eastern two-thirds of the U.S. Nov. 11-13. Trade reversed quickly however as forecasts show a warmer and wetter pattern developing for the Kansas City belt in the six-to-10-day weather runs and a more normal pattern for the soft red belt.
Brazil has decided to allow 750,000 metric tons (27.6 million bushels) of duty-free wheat from non-Mercosur countries. Mercosur is a trade bloc alliance of four countries within South America. This decision is likely due to the lowering of Argentina wheat estimates. Traders viewed this as a positive for potential U.S. wheat sales. The Rosario Grain Exchange lowered Argentine wheat crop estimates by 1 million metric tons to 19 million metric tons. Argentina wheat harvest is 9% complete.
Weekly export inspections were above expectations coming in at 529,000 metric tons (19.4 million bushels). Cumulative exports of 421 million bushels are up 23% from last year's pace.
France increased its export estimates slightly from 11.7 million metric tons to 12 million metric tons. France currently estimates a 39.5 million metric tons soft red crop up from the dry affected crop of 2018 that produced 34 million metric tons. Strategie Grains increased European Union soft red wheat export estimates to 28.8 million metric tons from 27.3 million metric tons previously. This is 7.8 million metric tons higher than last year's total.
Egypt tendered for an unspecified amount of wheat for early January shipment. Ukraine and France were the lowest offers before including freight in the $215.50- $216.50 per metric ton range. U.S. Gulf quotes are currently around $227 per metric ton free on board.
Winter wheat conditions declined 3% to 54% good to excellent, 33% fair and 13% poor to very poor. Cold conditions this week could lead to further declines upcoming reports. Winter wheat plantings are right at the average of 92% complete. Winter wheat emerged is at 78% versus 81% average.
Alberta reports 89.5% of spring wheat harvested compared to 84% last week in their last report of the season. This represents around 680,000 acres of spring wheat.
Current support for Minneapolis December is $5.115, with resistance at $5.32. For the week ending Nov. 14, December contracts for Minneapolis wheat were down 5.75 cents at $5.1275, down 2.5 cents at $5.0775 for Chicago wheat, and up 0.75 cents at $4.2225 for Kansas City wheat.
The corn market saw choppy trade this week on decent export inspections, a slow harvest and declining ethanol stocks. But favorable South American forecasts calling for rainfall kept a lid prices.
Weekly export inspections were at the high end of expectations coming in at 560,000 metric tons (22.1 million bushels). This was the third highest of the marketing year. Although this week helped, cumulative exports of 170 million bushels are running 61% behind last years pace. The current pace is similar to the post 2012 drought year.
Corn harvest is 66% complete versus expectations of 66-68%. This still lags the average of 85% complete for this time of year. Northern tier states from the Dakotas through Michigan are 31% to 61% behind normal pace with only 15% of North Dakota's crop harvested. A number of harvest reports tell of 28%-plus moisture corn with 48 to 52 pounds in test weight. Propane supply disruptions have also become a problem with the recent cold snap.
Ethanol production for the week ending Nov. 8 totaled 7.21 million barrels. This was up 1.58% from last week but down 3.47% from last year. Stocks were 20.985 million barrels, down 4.06% versus last week and down 10.76% versus last year. This is the lowest stocks number since September 2017. Ethanol margins have recovered modestly with the decline in corn prices lately which has led to an uptick in production rates.
U.S. gasoline demand is running 2.6% above year ago levels over the last eight weeks, but calendar year demand is running 0.2% above the prior year.
Crude oil stocks rose slightly more than expected to 449 million barrels. Gasoline stocks saw its first increase in seven weeks to 219.09 million barrels. E85 spread prices to E10 have narrowed in the Fargo market recently to -34 cents per gallon.
Brazil first crop corn shows about a quarter of the area under some amount of stress. Forecasts are favoring rainfall for the center south region in the next two weeks. Argentina looks to receive half to one inch rains through the weekend over their southern regions. Six-to-10-day forecasts showing favorable rains for most of Argentina with normal temperatures.
Six-to-10-day forecasts call for normal temperatures and wetter conditions through the heart of the U.S. Corn Belt. Northern areas that are struggling with harvest are called warmer and wetter than normal. Snow is favored by the Global Forecast System model for Minnesota, Wisconsin and northern Iowa later next week. Four to 8 inches are possible. Eight-to-14 day forecasts show above normal temperatures for the Dakotas, Minnesota and Wisconsin, which should help with harvest delays.
Soybean futures continue to trend lower despite U.S. fundamentals saying we should be higher. The U.S. Department of Agriculture seems to be high in its production estimates compared to what most people are saying. The sell-off started after President Donald Trump stated that the rumors about removing tariffs to get phase one signed were not true. Trump on Friday said he has not agreed to rollbacks of U.S. tariffs that is being sought by China. This comes after officials from both countries the day prior said China and the U.S. had agreed to roll back tariffs on each other's goods in a "phase one" trade deal. This rumor gave the markets a nice boost. But the problem with rumor-led rallies are when the rumors turn out to be false, the sell off is usually worse than what the rally was.
With a lack of bullish news from the USDA, the trade seems to want to focus on South America right now and their lack of current weather issues. Within the next week, 75% of Brazil is expecting rain, which will give their recently planted crop moisture to get a good start. Brazil's crop was 55% planted as of the Nov. 9 weekend, up from 44% the week prior and close to the average of 56%. Last year they were a record 69% planted at this time.
South America must be Eden's garden because they seem to can't help but have a good crop anymore. After a slow start due to a lack of moisture, the rain spigots turned back on and they are not having much of an issue anymore. November weather forecasts are also looking favorable for Brazil to give their crop a good start. It is still early in the growing season so anything can happen, but right now the trade is assuming they are on pace to have a good crop.
Weather also improves later in the week in the U.S., which may help U.S. farmers get close to wrapping up their soybean harvest. Soybean oil has been taking a hit this week after it failed to break through the $32 resistance level, which was a 17-month contract high set in February. December soy oil is currently around $30.50.
Soybean inspections totaled 48.9 million bushels for the week ending Thursday, Nov. 7, above the 33.1 million bushels needed weekly to reach USDA's export estimate of 1.775 billion bushels. Inspections for 2019-20 now total 400 million bushels, up 9% from the previous year.
On the daily charts, resistance is $9.48, the eight-month high set on 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 on May 13 recovery is major support after this.
For the week ending Nov. 14, January canola futures were down $1.30 at $462.00 Canadian The Canadian dollar was at .7545. This brings the U.S. price to $15.81 per hundredweight.
• Velva, N.D., $14.78 per hundredweight, December at $14.95.
• Enderlin, N.D., $15.88 per hundredweight, December at $15.74.
• Hallock, Minn., $14.93 per hundredweight, December at $15.27.
• Fargo, N.D., $15.70 per hundredweight, December at $15.70.
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, N.D.
Cash sunflower bids in Fargo, N.D., were at $18.10. December bids were at $17.95.
For the week ending Nov.14, soybean oil was down 72 cents at $30.78 on the December contract.