Export activity picking up on major crops
The U.S. Department of Agriculture monthly World Agricultural Supply and Demand Estimates report was viewed as neutral to friendly to the wheat complex.
USDA estimates 2019-20 U.S. ending stocks at 974 million bushels, which was lower than pre-report estimates of 1.01 billion bushels and compared to 1.014 billion bushels in November. Exports were revised 25 million bushels higher and imports were lowered 15 million bushels.
World ending stocks did, however, increase to 289.5 million metric tons, up from 288.28 million metric tons in November. This surpasses the previous world ending stocks record of 282.7 million metric tons in 2017-18 and was 3.3 million metric tons higher than pre-report estimates. Production was trimmed roughly 1 million metric tons for Argentina, Australia and Canada, while European Union and Russian wheat estimates increased 500,000 metric tons.
Weekly export sales were 503,000 metric tons (18.5 million bushels) which was above market expectations. Total commitments of 623 million bushels are now running 3.7% above year ago levels. Sales have averaged 14.6 million bushels over the last six weeks.
Weekly export inspections were at the lower end of expectations coming in at 314,000 metric tons (11.5 million bushels). This was the lowest total in five weeks. Cumulative exports of 478 million bushels are up 18% from last year but have been slowing as of late.
France increased its 2019-20 soft red wheat export estimate to 12.2 million metric tons versus 9.7 million metric tons last year. France expects soft red wheat area to decline 5% from last year to 11.7 million acres due to wet conditions during fall seeding. Strategie Grains estimates European Union soft wheat production for next year at 140.5 million metric tons, 5.3 million metric tons lower than this year's good crop. They estimate planted acreage declining 1.5 million acres. Earlier this week, a private firm also raised European Union soft red wheat production estimates for the current year to 145 million metric tons versus 126.9 million metric tons last year.
Egypt purchased 355,000 metric tons of wheat from primarily the Black Sea Region and France. They also canceled a soybean oil and sunflower oil tender for late January stating prices were too high.
Stats Canada released its Production of Principal Field Crops report Dec. 6 estimating the Canadian wheat crop at 32.3 million metric tons versus 32.2 million metric tons last year. This is slightly lower than USDA's current estimate of 33 million metric tons. However, in breaking down the numbers spring wheat production increased by 7.2% to 25.6 million metric tons while durum decreased 13.4% to 4.97 million metric tons and winter wheat decreased 32.4% to 1.7 million metric tons.
Much of central Texas, western Kansas and western Oklahoma are falling into D0 (abnormally dry) to D2 severe drought with a few pockets of D3 extreme drought according to the latest U.S. Drought Monitor. Eight-to-14-day forecasts show much warmer than normal temperatures for this area with limited rainfall.
March Minneapolis support is $5.215 with resistance at $5.38.
The corn market experienced a non-event with the monthly WASDE report this week but did see ethanol production and exports pick up at these lower price levels.
USDA reported a 1.6 million metric tons sale to Mexico which gave the corn market good strength in Dec. 12 trade. This was the fifth largest single sale of U.S. corn since records began in 1977; 1.074 million metric tons will be for 2019-20 and 526,000 metric tons are for 2020-21. Weekly export sales before this announcement were still respectable totaling 874,000 metric tons (34.4 million bushels). This was above expectations of 400,000-800,000 metric tons. Total commitments continue to lag the previous year by 44% at 610 million bushels. Weekly export inspections were 481,000 metric tons (18.9 million bushels) which was in the middle of expectations. Cumulative exports are tracking 257 million bushels, down 57% from last year.
Weekly ethanol production was 7.504 million barrels (315 million gallons), up 1.13% versus last week and up 2.49% versus last year. This was the highest production level in 23 weeks. Stocks as of Dec. 6 were 21.815 million barrels, up 5.7% versus last week and down 4.7% versus last year. This was also the largest weekly increase in 23 weeks. Cumulative corn usage for ethanol is 1.4 billion bushels.
USDA is projecting 5.375 billion bushels of corn to be used for ethanol production in the 2019-20 marketing year. Corn usage would need to average 103.8 million bushels per week to meet the USDA estimate. At a conversion rate of 2.9 gallons of ethanol produced per corn bushel that equates to 301 million gallons of weekly production.
Unfortunately, U.S. gasoline demand dropped to a 42 week low of 8.882 million barrels per day, 1.7% below last year's same week demand. Calendar year gasoline demand is holding a 0.2% increase versus the previous year. Gasoline stocks hit an 18 week high of 234.77 million barrels. Crude oil stocks rose slightly to 447.92 million barrels.
The U.S. corn balance sheets did not change from the November report. U.S. ending stocks for 2019-20 remain estimated to be 1.910 billion bushels with production at 13.915 billion bushels. This equates to a 13.7% stocks to use ratio.
World balance sheets (excluding China) also remained unchanged from the November report. Argentina corn production is expected to be 50 million metric tons and Brazil corn production is expected to be 101 million metric tons. China revisions added 5.8 million metric tons internally causing world ending stocks to increase to 300.56 million metric tons. This was above pre-report estimates of 295.52 million metric tons.
U.S. corn harvest is at 92% complete versus 94% expected. Northern tier states that were struggling the most with harvest report the following progress: North Dakota 43%, South Dakota 80%, Wisconsin 74% and Michigan 74%. This will be the last weekly crop progress report of 2019.
Argentina corn plantings are 56% compared to 57% for the five-year average. Brazil's first crop corn plantings are at 92% compared to 98% for the five-year average. Better than expected rains covered 85% of primary Argentina growing regions Dec. 11-12. Six-to-10-day forecasts show good chances of rain over the same area. Brazil has been experiencing good widespread rains covering 75% of the primary growing region. Weekend and six-to-10-day forecasts favor similar rain patterns.
Current support on March is $3.7525 with resistance in the $3.92 to $3.96 area.
Soybean futures were trying to recover from the five-week, 90-cent sell off we saw ahead of this latest mini buying spree. Soybean futures have gained back approximately a third of these latest losses back. The USDA monthly WASDE report was a non-event, which was expected. The USDA didn't make any changes on the soybean balance sheet, which will put the Jan. 10 report as a very major report and an important gauge at where soybean production and stocks are at for this past growing season.
The USDA left soybean production unchanged at 3.55 billion bushels and left yields unchanged at 46.9 bushels per acre. The USDA also kept ending stocks unchanged at 475 million bushels. Exports and demand numbers were not touched.
The USDA also kept Brazil's production (123 million metric tons) and Argentina's production (53 million metric tons) the same as in November. Brazil private analyst Safras has Brazil's production at 125.5 million metric tons. Global soybean ending stocks rose to 96.4 million metric tons, up from 95.42 million metric tons in November.
Midweek the USDA announced the sale of 585,000 tonnes of U.S. soybeans to China for delivery in 2019-20. This was China's largest announced purchase of US soybeans since April. The USDA also announced a sale of 140,000 metric tons of U.S. soybeans to unknown destinations for delivery in 2019-20. Add this on top of the 300,000 metric tons sale to China announced the weekend of Dec. 7 and this puts 1.025 million metric tons (37.66 million bushels) of sales on the books by mid-week. There are rumors that additional sales are expected ahead of the Dec. 15 deadline.
As of the close on Dec. 12, the trade was still awaiting President Donald Trump's decision on what he plans on doing with tariffs ahead of the Dec. 15 deadline. Bloomberg reported just after Thursday's market close that the "U.S. reaches trade deal in principle with China, awaiting Trump's signoff." The Wall Street Journal was reporting that U.S. negotiators have offered to cut existing tariffs by as much as half on roughly $360 billion of Chinese-made goods as well as to cancel a new round of tariffs set to take effect Dec. 15. Ahead of this latest U.S. offer, the Chinese wanted tariffs reduced or eliminated to get a phase one signing ceremony on the books.
China imported 8.28 million metric tons of soybeans in November, the most since August and up 53.9% from the same period as last year. They are likely building their hog herd quicker than the trade was expecting, or the hog herd decline was overstated. (Both are likely.)
First support is the January contract six-month low of $8.65 that was set in the middle of September. The contract low of $8.295 is major support and the weekly charts is showing $8.155 set on May 13.
On the daily charts, January resistance is $9.595, which was set on 8-month high of set on June 18th. On the weekly charts there is not much resistance after $9.785 and major resistance is in the $10.50 to $10.70 area.
January canola futures were up $0.70 for the week ending Dec. 12 at $459.10 Canadian. The Canadian dollar was at .7587. This brings the U.S. conversion price to $15.80 per hundredweight.
• Velva, N.D., $15.28 per hundredweight, January at $15.28.
• Enderlin, N.D., $15.94 per hundredweight, January at $15.94.
• Hallock, Minn., $14.83 per hundredweight, January at $14.83.
• Fargo, N.D., $15.90 per hundredweight, January at $15.90.
Stats Canada estimates canola production at 18.6 million metric tons, down 8.3% from the previous year and the lowest level since 2015. Harvested area was 20.6 million acres, 8.8% lower than last year.
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.
Stats Canada reports barley production at 10.38 million metric tons, up 23.9% from last year. Harvested area was up 13.9% to 6.7 million acres and yields were up 8.9% to 70.8 bushels per acre.
Cash bids for milling quality durum are $6.50 in Berthold and at $6 in Dickinson, N.D.
Canadian durum production is estimated at 4.97 million metric tons, down 13.4% from the previous year.
Cash sunflower bids in Fargo were at $18.60. January bids were at $18.35.
Soybean oil was up $1.01 for the week ending Dec. 12 at $32.23 on the January contract.