Grabanski: Biofuel news sparks buying interest
Wheat Wheat contracts backed off from early week gains as the Brazilian real sold off 56.5 or 1.7 percent on March 2 as the U.S. dollar traded 40 points higher to the $102.15 range. The six-to-10- and eight-to-14-day forecast models call for belo...
Wheat contracts backed off from early week gains as the Brazilian real sold off 56.5 or 1.7 percent on March 2 as the U.S. dollar traded 40 points higher to the $102.15 range.
The six-to-10- and eight-to-14-day forecast models call for below normal precipitation and above normal temperatures for the Central and Southern Plains. The Australian Bureau of meteorology increased the odds of El Niño developing to 50 percent over the next six months. This would be negative U.S. growing conditions. These weather concerns along with the cut in planted acreage is providing a firm undertone to the wheat complex.
Winter wheat monthly ratings were updated Feb. 27. Ratings did not change much over the past month. The one notable change was Montana dropping from 70 percent to 51 percent in the "good to excellent" category. Kansas decreased 1 percent to 43 percent good to excellent, Nebraska decreased 3 percent to 44 percent good to excellent, South Dakota decreased 5 percent to 57 percent good to excellent. Texas improved 4 percent to 34 percent good to excellent, Oklahoma improved 10 percent to 43 percent good to excellent, Colorado improved 4 percent to 40 percent good to excellent. These ratings are overall considerably lower than the same time last year.
Egypt purchased 535 billion tons of wheat, the largest amount since 2014. The lowest offer was Romania at $208.38 per ton, which sold 120 billion tons. Russia, at $208.79 per ton, sold 235 billion tons, France at $211.12 per ton sold 120 billion tons, and Ukraine at $212.72 per ton sold 60 billion tons. The U.S. hard red winter wheat, bid at $219.79 per ton, did not get a sale.
After a flurry of speculation and various news reports this week, the Trump administration stated it is not leaning in one direction or another on changing point of obligation for ethanol renewable identification numbers. A Bloomberg story on Feb. 28 stated that a pending executive order would change the blending obligation from refiners to position holders at the terminals.
Reports cited a possible deal being cut to treat E15 in the same manner as E10 for year round sales. These reports created heavy speculative buying early in the week. A 1 percent increase in the ethanol share of gasoline consumption moving from E10 to E11 would consume 530 million bushels, or one-fourth of current carry out.
Ethanol production for the week ending Feb. 24 averaged 1.034 million barrels per day. This was unchanged versus last week and up 4.76 percent versus last year. Total production for the week was 7.238 million barrels. Stocks as of Feb. 24 were 23.091 million barrels. This is up 1.86 percent versus last week and up 2.06 percent versus last year. Corn used in last week's production is estimated at 108.57 million bushels. Corn use needs to average 98.315 million bushels per week to meet this crop year's USDA estimate of 5.35 billion bushels.
Row crop received unexpected support midweek as rumors revolving around changes in biofuel policies were in the news. Soybeans saw big gains on Feb. 28 and March 1 as the market reacted with a couple days of speculative and knee-jerk reactions to White House rumors about biofuels. The market saw a correction on March 2 as worries about a Brazil record crop is still on the minds of traders. For the week ending March 2, the May contract was up 13 cents at $10.3725. November 2017 soybeans were up 14.25 cents to $10.2125. The talk is that President Trump is considering changing the biodiesel tax credit from a blender to a producer credit. If this turns out to be true, a shift to a producer credit would favor U.S. biodiesel production. That change is also expected to come with expansions to the amount of higher-blended E15 ethanol allowed to be sold in the country, tax credits for biodiesel and restrictions on biofuel imports. The U.S. Biodiesel Board has stated that applying the credit to U.S. producers only could have saved the U.S. Treasury $600 million in 2015.
Gains in palm oil futures pushed soybean oil higher to start the week. There is talk of a return of El Niño by this summer, which could lead to a drier year for Indonesia and Malaysia. The Brazilian real was down 56.5 or 1.76 percent March 2. This enticed a good amount of farmer hedging in Brazil, hence the selling pressure late in the week. Wetter weather in the northern parts of Brazil and reports of logistical logjams because of impassable roads added to the firmer tone. This has been news for a couple weeks now, but when the market is looking for bullish news to add to a rally, they find it. Even with a few weather issues, South America continues to receive favorable moisture where they need it, and there is still time to discount prices with increasing South American production forecasts.
The private firm Safras estimated Brazil's soybean harvest is at 34 percent complete versus 26 percent average on March 3, with Mato Grosso 66 percent finished. Southern Argentina received beneficial rains over the weekend where conditions were getting dry.
March 3's Commodity Futures Trading Commission data showed non commercials did get rid of some of their net long positions, but are still widely bullish in soybeans with 154,000 contracts net long on Feb. 21, down 16,000 from the previous week. China National Grain and Oils Information Center released a report saying soybean imports may decrease in the next few months due to lower crush margins, as the bird flu is starting to affect producers.
Soybean weekly export inspections were 25.9 million bushels for the week ending Feb. 23. This is below 38.8 million bushels for the same week a year ago. Inspections for 2016-17 are up 12 percent from the previous year and above USDA's projected 6 percent demand increase. U.S. soybean sales are up 24.5 percent versus last year. U.S. soybean sales are at 93 percent of USDA's target versus the five year average of 88 percent. Weekly export sales of soybeans showed a total of 15.7 million bushels for the 2016-2017 marketing year. This was well above the 4.8 million bushels needed this week to be on pace with USDA's February demand projection of 2.05 billion bushels. May soybean's new resistance is $10.80. Heavy resistance after that is $11.04. On the May soybean chart, support is at the $10.20 200-day moving average, which is the lowest major moving average. The psychological barrier of $10 would be support after that. The three month low is $10.02 and the 4.5 month low is $9.97 on the May contracts.
For the week ending March 2, canola May futures in Winnipeg were up $13.10 (Canadian) to $528.40 (Canadian) per million tons. The Canadian dollar traded down to 0.7465. This brings the U.S. price to $17.89 per hundredweight.
Cash bids in Velva, N.D., were $17.27 per hundredweight for March and $17.21 for April. Enderlin, N.D., bids were $18.06 for March and April. Hallock, Minn., bids were $17.71 for March and $18.08 for April. Fargo, N.D., bids were $18.25 for March and $18.30 for April.
Canola climbed after rumors of adjustments to US biofuel requirements sent U.S. soybeans and soyoil futures higher.
Cash feed barley bids in Minneapolis were at $2, while malting barley received no quote. Berthold, N.D., bid is $2, and CHS Southwest bid is at $2.60 in New Salem, N.D.
Cash bids for milling quality durum are $6.50 in Berthold, N.D., and at $6.35 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $15.20 for March and $15.20 for April. For the week ending March 2, soybean oil was $1.46 higher at $34.13 on the May contract.