Cooler temps dampen market

Wheat

The 2017 Northern Wheat Tour final results came in at 38.1 bushels per acre for spring wheat, 39.7 bushels per acre for durum and 46.6 bushels per acre for winter wheat. The weighted average was 38.4. For spring wheat this total was 7.6 bushels under the 2016 yield.

At 10.9 million planted spring wheat acres times 38.4, we would come up with an ending production of 418.5 million bushels compared to 493 million bushels last year.

Obviously there will be an abandonment factor in future U.S. Department of Agriculture reports, so look for that number to decline. For historical reference, our last fairly dry year for spring wheat production was 2002. That year the wheat tour estimated 32 bushels per acre. Abandonment in 2002 came in at 15.3 percent versus the recent 10 year average of 2.5 percent

A tour participant whose route covered west of the Missouri River stated that 30 to 50 percent of the wheat fields were baled up in that area. Using very rough math with a map provided by the tour showing five-year production averages, one could come up with a 17.6 percent abandonment rate statewide. Eight million acres in North Dakota and Montana times 17.6 percent would equal 1.4 million; 9.5 million acres times 38.4 would equal 365 million bushels of production. The latest forecasts are in the 390 to 410 million bushel range as Minnesota and northeast North Dakota are looking at exceptional crops. If abandoned acres come in under 17 percent, 390 million for final production could be close and it appears we have avoided a disaster crop in 2017.

The market was trading in a range of $7.45 to $7.95 until the July 25 trade when we saw a 35 cent sell off in the September contract. September hit a low of $7.125 on July 26 before making a recovery. $7.12 to $7.45 is now the existing trading range as we head into harvest.

With the improvement of basis over the winter months at certain locations compared to harvest, the market is signaling that it would prefer your wheat over the winter months. There is now a slight carry to December and combined with this slight basis improvement, delivery would be preferred December or later.

Corn

Corn continued its trend lower from its recent July 10-11 highs of $4.17. The good news is it met plenty of buying at the $3.82 December support level mid week. A few private forecasts have yield models showing under 165 bushels per acre versus the current USDA forecast of 170 and trend of 168. With the market holding $3.82, it appears the market has around a 165 to 166 yield priced in.

It continues to be a weather market. This week cooler forecasts led to pressure on thoughts that pollination damage would be minimized. However, the next two week forecasts are calling for drier than normal conditions, so the Dakotas in particular are still at risk for further yield declines. Six to 10 day forecasts are calling for below normal temps and below normal rainfall through the first week of August. Recent rainfall has been generally favorable for the heart of the Corn Belt with the exception of Iowa which experienced spotty rainfall. Southern and western Iowa and the Dakotas look to experience the most stress in the next week based on current weather models. For the week ending July 27, September was down 5.75 cents to $3.7425, December was down 6 cents at $3.8775.

Soybeans

There are five things the markets react to this time of year, and all five of them are weather. You can look at all the random fundamentals (like exports, crude oil prices, etc) that you want, but the bottom line is, all that really matters is temperature and rain amounts until the crop is in the bin. We are seeing this play out as soybean prices continue to keep a weather premium in the market over $10, even though at current yield estimates we will not be short soybean ending stocks around the world. For the week ending July 27, August soybeans were down 14.25 cents and November 2017 soybeans were down 14.75 cents.

Soybeans should have found early support the week of July 24 as their good to excellent ratings slipped 4 percent compared to last week, but that never materialized. The trade was looking for an unchanged to 1 percent decline in bean ratings and were trading a better crop earlier ahead of the report.

Soybeans reacted the way they should have on July 24 after a 4 percent decrease in the ratings, as they were up 20 cents in the overnights and getting producers bulled up once again. Once soybeans got back within 12 cents of the contract highs, the funds decided that there wasn't much risk anymore to short this market, and that started the 40-cent reversal in soybean prices. This kind of movement showed a key technical reversal, which made dry weather forecasts even that more important the rest of the week to provide underlying support.

Soybeans started a midweek recovery as rains in Iowa, Missouri and much of Nebraska were disappointing. Substantial rains were forecast for many parts of the Corn Belt but were spotty again and not as heavy as expected and hoped for. They were expecting rains between 1 to 2 inches, but most of the areas received less than a half an inch, with maybe 20 percent getting an inch or more.

The weather service continues to give a drier than normal outlook for northern half of the U.S. One saving grace for much of the Midwest has been recent cooler temperatures and a cooler forecast, but there are still enough areas that are on the brink of yield losses if rains don't fall soon. Cooler and wetter conditions are pushing into the southern half of the U.S. in these same models.

Canola

For the week ending July 27, November canola futures in Winnipeg were down $1 Canadian to $503.8 Canadian per metric ton. The Canadian dollar is trading at 0.7967. This brings the U.S. price to $18.21 per hundredweight.

• Velva, N.D., $18.52 per hundredweight, new crop $17.55.

• Enderlin, N.D., $18.37 per hundredweight, new crop $18.19.

• Hallock, Minn., $18.05 per hundredweight, new crop $17.51.

• Fargo, N.D., $18.80 per hundredweight, new crop $17.90.

Barley

Cash feed barley bids in Minneapolis were at $2.05, while malting barley received no quote. Berthold, N.D., bid is $2, and CHS Southwest New Salem is $2.50.

Durum

Cash bids for milling quality durum are $8.25 in Berthold and at $8.50 in Dickinson.

2017 U.S. durum estimates from the N.D. Quality Wheat Tour came in at 39.7 bushels per acre versus 45.4 bushels per acre last year.

Sunflower

Cash sunflower bids in Fargo were at $17.50. October-November bids were at $16.60.

For the week ending July 27, soybean oil was down 16 cents at $33.81 on the August contract.