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Erin Ehnle Brown / Grand Vale Creative

Bears not scared

Wheat

December Chicago went to 18 cents premium over Minneapolis in Nov. 21 trade. The March Chicago contract is around a 3.25 cents premium over Minneapolis.

It is a very rare occurrence that Chicago trades at a premium over Minneapolis. It was close to even this spring when the May contracts were going into delivery and the last time it happened was in November 2015. The other occurrence in my memory was the summer of 2007 before the record run up of wheat prices in 2008.

Chicago soft red stocks fundamentally are at one of the lowest points since 2008. Minneapolis stocks meanwhile are projected to be 301 million bushels versus 265 million bushels last year and one of the highest levels in 10 years. So the unusual spread is probably justified. The issue though is all the poor quality spring wheat from this year's harvest. Is the board purposely going lower to push grain into feed channels?

I get the feeling that the same Chicago contract that bled out a bunch of traders last spring with buy Kansas City/sell Chicago is going to bleed out anyone who tries a buy Minneapolis/sell Chicago. However; I just can't bring myself to buy Chicago and sell Minneapolis at these levels. I will patiently watch how the spread acts on the December contract as longs need to be out next week and set some targets on getting involved in the March spread.

If history is any indicator, Minneapolis shows very good gains to Chicago after it reaches an inversion. The big question is how wide can the inversion go before it corrects.

Winter wheat conditions declined 2% versus expectations. Ratings are now 52% good to excellent, 34% fair and 14% poor to very poor. Overall, the soft red belt improved this week while the Kansas City belt saw some rather large declines. Oklahoma had another notable decline of 11%. Texas declined 6%, Colorado declined 7%, Arkansas declined 9% and Kansas declined 4%. Soft red states of Illinois, Indiana and Ohio all improved 2-3%. Winter wheat planted is right at the 95% average and emergence is lagging the average by 3% at 83%.

Weekly export inspections were right in the middle of expectations at 449,000 metric tons (16.5 million bushels). This was also right at the average weekly "needed" pace to meet the U.S. Department of Agriculture's projection of 950 million bushels. Cumulative exports of 438 million bushels are up 21% from last year's pace. Weekly export sales were at the high end of expectations coming in at 438,000 metric tons (16.1 million bushels). Total commitments of 574 million bushels are up 8% from last years pace.

Algeria announced that it will sharply reduce imports after a corruption probe into their state grain buying office. France usually gets this market, but the reduction will be roughly 2 million metric tons which will come on to international markets. This sent matif futures lower in Nov. 21 trade.

Short term forecasts (1-5 day) favor rain in the Kansas City belt which saw ratings reductions this week. Six-to-10-day forecasts also favor rain in both the Kansas City and soft red belts. Temperatures look to be warmer than normal in both regions during this timeframe.

Current support for Minneapolis December is $4.92 with resistance at $5.21. For the week ending Nov. 21, December contracts for Minneapolis wheat were down 8.5 cents at $4.9525, up 6.25 cents at $5.09 for Chicago wheat, and up 4 cents at $4.21 for Kansas City wheat.

Corn

Corn futures are continuing their downward slide and are back at two-month lows as there just aren't any buyers in the market to scare the funds. The funds are heavy net short well over 100,000 contracts and need a reason or a threat to exit those positions.

The USDA didn't do it in their past reports, and South America's crop is off to a decent start. The funds look at the numbers on the USDA's spreadsheets and don't see an issue. Harvest pressure is on the future's side as the basis level improvements seem to be taking care of the elevators and ethanol plants' short term needs.

The uncertainty around the crop still left in the field doesn't seem to concern the trade as their focus seems to be on a poor start to exports and a lack of weather concerns in South America. It would also be helpful if the leaders of the House of Representatives would actually bring the U.S.-Mexico-Canada Agreement up for a vote, because reports are that it would have no trouble passing.

As of Nov. 17, the USDA said there was roughly 3.3 billion bushels (19.6 million acres) left to be harvested in the U.S. The states with the most bushels left to be harvested are Illinois (80% harvested), Iowa (77% harvested), Nebraska (85% harvested), and North Dakota (23% harvested). Other harvest progress shows Minnesota was 77% harvested, Michigan 39%, Wisconsin 44% and South Dakota 53%.

As of Nov. 17, corn harvested was 76% complete, 1 or 2% less than what the trade was expecting. This is the third slowest harvest since 1981. Corn was 66% harvested last week, 89% harvest last year and the five-year average is 92% complete.

Ethanol production continues to tick higher for the eighth straight week and for the week ending Nov. 15 averaged 1.033 million barrels a day. This is up 0.29% versus last week but down 0.86% from a year ago. We are still not at the pace we were last year. Corn use needs to average 104.01 million bushels per week to meet the USDA's estimate of 5.375 billion bushels. Ethanol stocks continue to decline and are now at their lowest level since January 2017.

Minor support is at $3.64, but major support is the contract low set at $3.5225 on Sept. 9. Major resistance is the high set a little over a month ago at $4.025.

Corn futures at current prices are only 5-10 cents higher than this time last year. The surprising fact is that corn futures this year are higher than they have been in the last five years the end of November. One difference is this year we had issues with our crop, while the past three to four years we really haven't as a country as a whole.

But what it comes down to is that poor future prices at this time of year have been the norm and history repeated itself again this year.

Soybeans

Soybean futures continue to trend lower as hope is mostly lost that the U.S. and China will have a deal done anytime soon, if at all before next year's U.S. elections. Every week that goes by without a U.S./China trade agreement turns more and more people pessimistic into thinking nothing will get done. President Donald Trump once again said that he will hike tariffs on Chinese imports even higher if an agreement with China is not reached but he has not given a deadline for these hikes.

South America weather continues to destroy U.S. prices, as they can't help but get timely rains when they need them. The two-week forecast for Brazil and Argentina shows widespread rain forecasts for almost everywhere except for the northern part of Brazil. The last thing U.S. farmers need is for South America to have another big crop, all the while their tanking makes their grain cheaper on the global market, mainly to China.

With a projected U.S. carryout of 475 million bushels, you would think the trade would be more worried about the 9% of the soybeans (approximately 6.9 million acres and 320 million bushels) that are still left to be harvested this year. There are still bushels to be combined in the U.S. that farmers may not get to and soybean production that is well off the last few years' pace. As of Nov. 17, the U.S. soybean harvest was 91% complete versus 90% expected, 85% last week, 91% last year, and 95% for the five-year average.

The soybean market surprisingly also didn't react to the record National Oilseed Processors Association crush numbers for the month of October that was reported last week.

Soybean inspections totaled 56.3 million bushels for the week ending Thursday, Nov. 14, above the 32.7 million bushels needed weekly to reach USDA's export estimate of 1.775 billion bushels. Inspections for 2019-20 now total 457 million bushels, up 12% from the previous year. The USDA weekly export sales report showed 55.7 million bushels (1,516,700 metric tons) of soybean export sales for 2019-20. Soybean export commitments total 872 million bushels for 2019-20 and are up 5% from a year ago.

Managed fund net long positions shrank more than expected for the week ending Nov. 12 as they were only net long 32,000 contracts, down from 58,000 the week prior.

First support is $8.84 that was set in the middle of September and then $8.525 which was the recent low set on Aug. 28. 8.155 set on May 13 recovery is major support after this.

On the daily charts, resistance is $9.48, which was set on an eight-month high on June 18. On the weekly charts, there is not much resistance after $9.60 until $10 and major resistance is in the $10.50 to $10.70 area.

Canola

For the week ending Nov. 21, January canola futures were up $0.70 at $463.20 Canadian. The Canadian dollar was down .0029 at .7530. This brings the U.S. conversion price to $15.82 per hundredweight.

• Velva, N.D, $14.96 per hundredweight, December at $14.96.

• *Enderlin, N.D., $15.75 per hundredweight, December at $15.75.

• *Hallock, Minn., $14.97 per hundredweight, December at $15.14.

• *Fargo, N.D., $15.95 per hundredweight, December at $15.80.

The recent high U.S. conversion price was $16.10 on Oct. 8. Oct. 28 saw the U.S. conversion price at $16.02. These dates reflect recent highs in either canola futures OR the Canadian dollar. Based on the charts if we can get BOTH Canola futures and the Canadian Dollar near the top end of their recent ranges, a realistic U.S. conversion price would be $16.20 (before basis).

Barley

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.

Durum

Cash bids for milling quality durum are $6.50 in Berthold and at $6.25 in Dickinson, N.D.

Sunflower

Cash sunflower bids in Fargo were at $18.20, with December bids at $18.

For the week ending Nov. 21, soybean oil was up 26 cents at $30.69 on the December contract.

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