Wheat
We have been seeing a few favorable spot basis bids pop up this week. One location was offering -0.37 and another -0.50 on spring wheat in the central Dakotas. These are the best basis bids we have seen recently.
During the holidays, we see some bids pop up here and there as less grain is moving, locking in basis at favorable levels and allowing market upside going into spring is good strategy.
The other side of the coin are those who chose to hedge at $5.85 in June. These contracts have until late February to lock in the basis. A number of those locations are in the -0.80 ranges and haven't budged recently, although most were -$1 during harvest. Many of these locations are sitting on a pile of wheat and don't really need to improve the basis. The HTA strategy has us 50 cents ahead of current cash prices in the $4.50 range.
In each of these cases, we are looking at about $5 cash. If producers decide to take the cash vs. setting the basis and leaving the futures side open into spring, we would retain ownership with calls or futures. Either way, we would be long this market going into spring.
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Egypt tendered for 360,000 tons of wheat. Sales came from Russia, Romania and most notably Argentina with an average price of $197.50 per metric ton. Argentina had offered $173.50 per metric ton. In a statement by Egypt's supply minister strategic wheat reserves are sufficient to April. The bad news is U.S. wheat was uncompetitive on this tender.
The U.S. dollar is currently trading in a range between $100 and $103.50. The strengthening dollar hurts our ability to export grains at competitive prices.
Some analysts are saying up to half of the winter wheat crop would experience 5 to 10 percent losses with the lower-than-expected Arctic air mass temps recently. Trade has discounted any concerns with this recent cold snap.
On the March Chicago, current support is the contract low of $3.93 with $4.0175 as resistance. The March contract is only 4 cents off its recent lows. Managed money remains heavily short this market at near 93,000 contracts and open interest increased 7,500 contracts in the Dec. 20 and 21 trade.
U.S. weekly export inspections were 17.6 million bushels for the week ending Dec. 15. This was below the 19.4 million bushels for the same week a year ago. Inspections for 2016 to '17 total 536 million bushels, up 27 percent from the previous year and slightly above USDA's projected increase of 26 percent. Export sales totaled 10.9 million bushels. This was above the 9.8 million bushels needed to keep pace with USDA's demand projection of 975 million bushels. Weekly shipments of 15.1 million bushels were below the 19.3 million bushels needed for this week's report.
For the week ending Dec. 22, March contracts for Minneapolis wheat were down 10.25 cents at $5.34, down 12.25 cents at $3.97 for Chicago wheat, and down 7.5 cents at $4.08 for Kansas City wheat.
Corn
Ethanol production for the week ending Dec. 16 averaged 1.036 million barrels per day. This is down 0.38 percent from last week and 6.47 percent from last year. Total ethanol production for the week was 7.252 million barrels. Stocks as of Dec. 16 were 19.06 million barrels. This is down 0.08 percent from last week and down 6.51 percent from last year. Corn used in last week's production was 108.78 million bushels, bringing cumulative corn usage for ethanol in this crop year to 1.6 billion bushels. Corn use needs to average 100.257 million bushels per week to meet USDA's estimate of 5.3 billion bushels.
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Ethanol margins remain favorable with higher crude oil prices and we have drawn down stocks the past few months. But, we are starting to see a slight decrease in usage, which is typical in the winter months. Chinese ethanol imports for November are down 47 percent on the year as they are ramping up internal production to chew through some of their older state corn reserves. For the week ethanol futures closed 0.005 cents higher at $1.57 on the January contract. The recent contract high of $1.76 was hit on Dec. 13.
An estimate released last week from the Brazil consulting firm Agrural pegs a 33 percent increase in South American corn production this year to 88.3 million metric tons. Vietnam announced it will be halting imports of dry distiller's grains for 60 days. The European Commission raised corn production by 1.9 percent to 60.2 million metric tons.
Weekly export inspections were at the lower end of estimates at 63.6 million bushels for the week ending Dec. 15. This is above the 53.7 million bushels for the same time last year. Inspections total 1.09 million bushels for 2016 to '17, up 19 percent from the previous year and above USDA's demand projection of a 6 percent increase. Export sales totaled 49.2 million bushels with all for the 2016 to '17 marketing year. This was above the 24.2 million bushels needed this week to remain on pace with USDA's December demand projection of 2.225 billion bushels. Weekly shipments of 30.7 million bushels were below the 44 million bushels needed in this week's report.
On the March chart support is $3.4625 and then the two-month low of $3.42. Resistance is at $3.525 and then $3.56. The corn market has settled below the 100-day moving average, which is a weak signal for technical traders.
For the week ending Dec. 22, March corn was down 9 cents at $3.4725 and the May contract was down 9.0 cents at $3.54. Minneapolis bids were 4 cents lower at $2.8725.
Soybeans
Soybeans saw a sell-off last week, as South America, especially Argentina, started getting some needed rains. Rains over the weekend in Argentina, where soy planting is 76 percent completed, and favorable weather over much of South America is starting to get nervous. This is especially true for those that have been bullish since March.
Analysts are also creeping up production estimates in Brazil, with ideal weather forecast this growing season. Soy oil closed at its lowest level in a month. Some selling is being driven in part by lower Asian protein markets as palm oil is at a four-week low. Meal exports were a new high for the marketing year, but only up 1.4 percent compared to the same week last year. Accumulated meal exports are still down about 12.5 percent compared to a year earlier.
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Export reports continue to show there is still an appetite for our soybeans. What remains to be seen is how big the South American crop will be and how their big crop will affect U.S. exports going into the summer.
Soybeans saw double-digit losses three days last week, and closed below the physiological barrier of $10. We broke through most major moving averages this week, with the 200-day moving average of $10.06 being the most recent one to fall. The 100-day moving average of $9.925 is the last one to fall, and January soybeans are flirting with it now. January options expired Dec. 23, and the market went gunning for the highest volume options at the $10 strike price. For the week ending Dec. 22, January soybeans were down 42.25 cents and the March contract was 42.75 cents lower.
Soybean weekly export inspections were 63.6 million bushels for the week ending Dec. 15. Inspections for 2016 to '17 are up 19 percent from the previous year and above USDA's projected 6 percent demand increase. Weekly export sales of soybeans showed a total of 66.9 million bushels, with the majority for the 2016 to '17 marketing year. This was well above the 10.3 million bushels needed last week to be on pace with USDA's December demand projection of 2.05 billion bushels.
On the January chart, we broke support of the 200-day at $10.06 and now looking at $9.80 chart support. Major support is the recent contract low of $9.40, and $10.20 is new resistance. We now seem a long way off the recent highs of $10.65.
Canola
As of close Dec. 22, canola January futures in Winnipeg, Manitoba, traded down $10.60 (Canadian) for the week to $505.7 per metric ton (Canadian). The Canadian dollar traded at 0.7421. This brings the U.S. price to $17.03 per hundredweight.
Cash bids in Velva, N.D., were $16.43 per hundredweight for December and January, and $16.79 for February. Enderlin, N.D., bids were $17.33 for December and January and $17.53 for February. Hallock, Minn., bids were $16.85 for December and January and $17.11 for February. Fargo, N.D., bids were $18.10 for December and $18 for January.
Stats Canada released its Production of Principal Field Crops Report Dec. 6. Canadian farmers produced 18.4 million metric tons of canola in 2016, virtually unchanged from 2015. Yield was a record 42.3 bushels per acre, offset by a 6.6 percent decline in harvested acres at 19.2 million.
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Barley
Cash feed barley bids in Minneapolis were at $2, while malting barley received no quote. The Berthold, N.D., bid is $2 and CHS Southwest bid is at $2.25 in New Salem, N.D.
Stats Canada reported a 6.8 percent increase in production to 8.8 million metric tons. Average yield was a record 73.4 bushels per acre with 5.5 million acres harvested, 5.6 percent less than 2015.
Durum
Cash bids for milling quality durum are $6.50 in Berthold, N.D., and at $6.50 in Dickinson, N.D.
Sunflowers
Cash sunflower bids in Fargo, N.D., were at $14.35 for December and January and $14.85 for February.
Soybean oil was $1.88 lower for the week to $34.86 on the January contract.
