Late planting sparks key market reversal

Wheat

Technical indicators are showing a possible bottom in the wheat complex. It doesn't happen very often in grains where we have a spike bottom (May 13 price action with a new low followed by a higher close). But these markets have been counterseasonal so far (lows in the spring during planting) so the bottom could be in. Generally, grain markets languish at lows for months at a time.

The markets have been anything but typical this season. I always await the threat of a spring freeze to spark the wheat markets for 30 cent gains in the spring. But with everything running counterseasonal, maybe it will be the threat of warmer and wetter conditions during heading and a crop behind average in maturity that gives the wheat a boost in the spring of 2019.

Soft red ratings continue to be lower than average compared to hard red ratings. This has led to a widening of the Kansas City to Chicago spread to -50.25 cents. Typically, the Kansas City market is +10 cents to Chicago. It's been interesting watching this spread widen from the -20 to -35 area for much of the winter.

Winter wheat conditions remained steady at 64% good to excellent for the second straight week. The crop is rated 28% fair and 8% poor or very poor. Winter wheat headed is 42% compared to 54% for the five-year average. Spring wheat is 45% planted compared to 67% for the five-year average. Emergence of 10% is well behind the average pace of 34%, but it can be noted that last year at this time it was 13%.

A private forecaster estimates spring wheat acreage at 12.36 million acres versus the 12.83 million acres estimate in the March planting intentions report. This would jive with what we have been hearing from customers that decided against planting additional spring wheat acres with the April decline in prices.

Russian wheat prices have been on a downtrend. Recent Black Sea Region prices have been quoting $181 per metric ton, down from $211 per metric ton in April.

Weekly export inspections were a marketing year high of 842,000 metric tons (31 million bushels). With three weeks to go, it is likely that the U.S. Department of Agriculture's revised export target of 925 million bushels for 2018-19 will be met. New crop export sales were 419,000 metric tons (15.4 million bushels) which was above expectations. Old crop sales were minimal, bringing total commitments to 943 million bushels and enough to justify USDA's 925 million bushels export projection.

Current support is $4.485 Chicago. The March 26 high of $4.825 would be considered resistance. Current support for July Minneapolis is $5.15 with resistance at $5.354; $5.4525 would be considered heavier resistance.

For the week ending May 16, July contracts for Minneapolis wheat were up 9.75 cents at $5.2675, up 42.25 cents at $4.67 for Chicago wheat, and up 29.75 cents at $4.1675 for Kansas City wheat.

Corn

Corn futures experienced a key reversal early week after reaching new contract lows. As of May 7, managed funds were at 282,000 contracts net short, short covering 25,000 short contracts with much more short covering activity this week. Much-behind-average planting progress sparked the move higher.

Corn planting progress as of May 12 was at 30% versus the five-year average of 66% complete. Many trade estimates were at 33% to 36%. The eastern Corn Belt raised a number of red flags with Illinois only 11% planted versus 82% for the five-year average. Indiana at 6% versus 57% average and Ohio at 4% versus 47% complete are heavily saturated and not expected to get much planted this week or even the following week with any rain.

The rest of the Corn Belt wasn't much better with northern tier states all well behind average pace. Minnesota was at 1% planted versus 22%, South Dakota 4% versus 54% and North Dakota 11% versus 43%. The Mississippi Delta continues to struggle with comments that Arkansas, after 5-inch rains last week, may see planted corn acres fall from the intended 830,000 to 450,000.

It's still a weather market despite all the rhetoric on the trade front, and the weather has not cooperated the last few weeks to allow timely U.S. planting and we've set ourselves up for a potentially bullish situation. Last year, the first weekly crop ratings for corn were released at 80% good to excellent with trade expecting about 70%. This effectively ended the spring rally and the market never recovered. Now we have a situation where little corn is in the ground and that which is planted is struggling with emergence. I could see a scenario where we get very poor crop ratings with the first report of the season the last week in May. This on top of poor planting progress and a potential E15 announcement that has been promised by June 1 would all be friendly to the corn market.

The weather can always turn on a dime, but some forecasters have alluded to the 1993 summer. That was the 40-40-40 year in the north with 40 bushel yields, 40% moisture and 40-pound test weight corn, a total disaster. Extended forecasts show a wetter pattern continuing at least through the first half of June. There is a lot of speculation now that prevented planting acres for corn could surge higher as the ever important date of May 25 approaches.

The $3.8075 July resistance held in May 15 trade, with the market reaching $3.80. Current support is $3.6875, with the 50-day moving average of $3.71.

Weekly ethanol production was 7.357 million barrels, up 1.45% from last week and down 0.66% versus last year. Stocks as of May 10 were 22.25 million barrels, down 0.97% from last week but up 3.46% versus last year.

Soybeans

November soybean futures saw an impressive turnaround after reaching a contract low of $8.155 as they found support from the corn and winter wheat markets. There was also likely some short covering from the funds as they were adding to their record short soybean positions for the past month. When everybody starts believing that soybeans should keep going lower with the trade talks with China going nowhere, the funds start buying. End users are also seeing these soybean prices as a bargain.

Heavy delays in planting pace also gave the market a boost. Even with corn planting well behind schedule, there doesn't seem to be much fear of soybean acres increasing as soybean prices continue to lag down near 10-year lows. The overabundance of ending stocks in the U.S. also will not disappear anytime soon. The USDA did announce a sale of reported 6.6 million bushels of U.S. soybeans for 2018-19, sold to an unknown buyer. Brazil's soybeans are priced about 70-80 cents higher than U.S. old crop soybeans currently, which makes U.S. soybeans a bargain to most global buyers other than China.

Soybeans planted for the week ending May 13 was 9% complete versus 32% last year and 29% for the five-year average. The trade was expecting 14% planted. The entire Midwest is now at least 12%-30% behind average pace. Minnesota is 3% planted versus 36% for the five-year average. Other states that are lagging compared to their average are Illinois 3% versus 34%, Indiana 2% versus 26%, Iowa 13% versus 31%, North Dakota 5% versus 20%, and South Dakota is 1% versus 19% average. There is only one state (North Carolina) out of the 18 states the USDA surveys that is ahead of the five-year pace. The weather has created talk of prevented planting for corn, but it is also being talked about for soybeans.

The National Oilseed Processors Association crush numbers for April were 159.99 million bushels, which was slightly below the estimates of 161.607 and down for the second month in a row. There also was talk that China made a large purchase of soybeans from Brazil and that could be with the breakdown in trade talks with the U.S.

Export sales totaled 24.8 million bushels and above the 5.4 million bushels we saw last week, but there are still 265 million bushels unshipped to China. For the week ending May 9, USDA reported an increase of 13.6 million bushels (370,900 metric tons) of soybean export sales for 2018-19 and an increase of 11.1 million bushels (303,400 metric tons) for 2019-20. Last week's export shipments of 22.6 million bushels were below the 31 million bushels needed each week to achieve USDA's export estimate of 1.775 billion bushels in 2018-19. Soybean export commitments now total 1.662 billion bushels in 2018-19 and are down 18% from a year ago. Secretary of Agriculture Sonny Perdue said his department is looking at another $15 billion to $20 billion package for this year.

November soybeans broke through the contract low of $8.30 on May 10. The contract low of $8.155 set on May 13 is new support. Resistance for November is $8.7425. The front month contract July low of $7.91 set on May 13 is the lowest futures price since $7.76 that was set in December 2008. This is now major support.

Canola

For the week ending May 16, July canola futures were up $11.20 at $447 Canadian per metric ton. The July Canadian dollar was down .00115 at 0.74395. This brings the U.S. price to $15.08 per hundredweight.

• Velva, N.D., $15.15 per hundredweight, June at $14.65.

• Enderlin, N.D., $15.22 per hundredweight, June at $15.22.

• Hallock, Minn., $15.44 per hundredweight, June at $15.27.

• Fargo, N.D., $15.15 per hundredweight, July at $15.20.

Barley

Cash feed barley bids in Minneapolis were at $3.25, while malting barley received no quote. Berthold, N.D., bid is $2.75 and CHS Southwest New Salem, N.D., bid $3.

Durum

Cash bids for milling quality durum are $4.50 in Berthold and at $4.55 in Dickinson, N.D.

Sunflower

Cash sunflower bids in Fargo were at $17.10. June bids were at $17.25.

For the week ending May 16, soybean oil was up 93 cents at $27.72 on the July contract.