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Markets firming on weather

Wheat The wheat market was very strong this week led by Minneapolis futures as the heart of the spring wheat growing region suffered high heat and deteriorating conditions. June 4 conditions ratings for the six major producing states were at 55 p...

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Wheat

The wheat market was very strong this week led by Minneapolis futures as the heart of the spring wheat growing region suffered high heat and deteriorating conditions. June 4 conditions ratings for the six major producing states were at 55 percent good to excellent, compared to 62 percent last week. Poor to very poor conditions increased to 11 percent, up from 6 percent last week. The latest U.S. Drought Monitor shows worsening conditions with moderate to severe drought for most of North Dakota and South Dakota and eastern Montana.

Agriculture and Agri-Food Canada reports southern Saskatchewan and southwestern Manitoba have received 40 percent less than normal precipitation during the 30 day period prior to June 5. At the same time, west central Saskatchewan and east central Alberta have received over double the normal rainfall. These conditions have wheat and canola 10 days behind normal development.

Yield reports continue to come in from Texas. Overall yields are average, but protein levels are on the low end. A guest speaker at a milling convention in Kansas City was quoted saying that suppliers need to buy up protein needs as the hard red winter wheat crop is lacking protein.

Futures traded 20 cents higher at one point in June 8 trade to the $6.20 area in most Minneapolis contracts. The $6.20 level is a high for most contracts that was reached in June 2016 and is currently major resistance. The latest Commodity Futures Trading Commission data shows that funds increased their net long in Minneapolis contracts by 1,993 to 4,976.

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Australian prices hit their highest level of 2017 at $212.50 per metric ton. This was up $4.50 per metric ton week on week as sellers are increasing offers due to concerns over new crop production due to continued dryness. Australia's Bureau of Meteorology stated on June 5 that serious to severe rain deficiencies were recorded between March 1 to May 31 on the western coast and Eyre peninsula in southern Australia, both key wheat producing areas. The Australian dollar was up 2 percent to $0.76 which also increased wheat prices.

Final export sales for the 2016-17 marketing year ending June 1 totaled 974 million bushels, with 69 million bushels of unshipped sales rolled to the 2017-18 marketing year. The USDA's May demand projection was 1.035 billion bushels, but all wheat totals should be increased by marketing year shipments of wheat products.

Weekly export inspections were 19.2 million bushels for the week ending June 1. This was above the 14.4 million bushels for the same week a year ago. Inspections for 2016-17 total 3 million bushels, down 60 percent from the previous year, but only reflects one day and is not enough data to compare to the previous year.

For the week ending June 8, July contracts for Minneapolis wheat were up 20.5 cents at $6.0425, up 19.75 cents at $4.4925 for Chicago wheat, and up 20.5 cents at $4.5375 for Kansas City wheat.

Corn

Corn managed to break out of a consolidated range to the high side this week. In June 8 trade, July contracts traded near the winter highs and the December contract exceeded the winter high of $4.0375. Much of the move was following the increased volatility in the wheat complex and the developing drought situation in the northern plains. Global Forecast System models call for good rains in the eight to 14 day forecast but European and Canadian models show a drier outlook. Corn backed off from its highs on June 8 as traders seemed intent to trim positions with this uncertainty.

Weekly corn condition ratings were 68 percent good to excellent compared to 65 percent last week. Poor to very poor ratings were 6 percent compared to 7 percent last week. Corn emergence is at 86 percent nationally versus the five-year average of 87 percent. Progressive Ag's yield model currently shows below trend line yields based on these numbers. Delayed planting and replanting through much of the eastern corn belt was not enough to break the market out of the established range this spring. With the dry forecast, the market maybe coming to a realization that we could experience below average yields in 2017. It is likely that corn acres will be less than the 90 million from the March 31 intentions report due to the planting struggles in the eastern cornbelt.

The June monthly World Agricultural Supply and Demand Estimates report left old crop and new crop corn stocks and use unchanged from the May report despite recent good demand and export numbers. 2016-17 U.S. ending stocks are estimated at 2.295 billion bushels and 2017-18 ending stocks are 2.11 billion bushels. USDA left the U.S. average yield estimate at 170.7 bushels per acre. Brazil corn production came in at 97 million metric tons versus average trade estimates of 96.48 million metric tons. Argentina corn production was 40 million metric tons versus the average guess of 40.29 million metric tons. World ending stocks are at 224.6 million metric tons for 2016-17 and 194.3 million metric tons for 2017-18.

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CFTC data for May 31 showed noncommercials increased the unusual heavy net short position for this time of year by 24,000 contracts to -201,000. We would expect this position to be reduced in next week's numbers as much of this week's move was short covering. For the week ending June 8, July corn was up 15 cents at $3.8775 and December corn was up 12.75 cents at $4.0375.

Weekly exports sales were bullish totaling 18.8 million bushels, with 13.7 million bushels sold for the 2016-17 marketing year. This was above the 7.9 million bushels needed this week to be on pace with USDA's May demand projection of 2.225 billion bushels. Weekly shipments of 47.8 million bushels were above the 40.8 million bushels needed in this week's report. Outstanding sales dropped to 430.6 million bushels, 25 percent less than the previous year. Inspections were 46.3 million bushels for the week ending June 1. This was above the 42 million bushels for the same week a year ago. Inspections for 2016-17 totaled 1.745 billion bushels, up 50 percent from the previous year and well above USDA's projected 17 percent demand increase.

Weekly ethanol production averaged 999,000 barrels per day. This was down 2.06 percent versus last week and down 0.7 percent versus last year. Stocks as of June 2 were 21.982 million barrels. This is down 3.43 percent versus last week and up 8.69 percent versus last year. Corn used in last week's production is estimated at 104.9 million bushels. Cumulative corn used for ethanol production for this crop year is 4.2 billion bushels. Corn needs to average 97.197 million bushels per week to meet USDA's estimate of 5.45 billion bushels.

Soybeans

We saw short covering in the grains complex as the Midwest was forecast to have hotter than normal weather with minimal moisture. Hot, dry weather is the main focus on traders and producer's minds at the moment, and they will trade major rain events, or lack thereof. It was much needed for producers as November soybeans closed up five straight days for the first time since February. Soybeans closed above $9.40 resistance and new resistance is now $9.60. For the week ending June 8, July soybeans were up 16.75 cents and November 2017 soybeans were up 18.25 cents.

The seven-day forecast is for below normal precipitation in most of the U.S. (except the Pacific Northwest), and temperatures will be above normal in all of the Corn Belt and U.S., with the exception of the Delta states and southeast. The eight- to 14-day forecast is putting rain back in the forecast now.

On the June 5 crop progress report, soybean plantings were at 83 percent nationally versus the five-year average of 79 percent planted and 82 percent planted last year. Average estimates for this week was at 78-80 percent. Soybean emergence was at 58 percent nationally versus the five-year average of 59 percent planted and 62 percent emerged last year.

The USDA released their monthly supply and demand report on June 9, and they raised world ending stocks more than the trade was projecting. This was a bearish report for soybeans, but the market appears to just be trading U.S. weather at the moment.

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U.S. ending stocks for 2016-17 came in at 450 million bushels, in line with the average pre-report guesses and above the 435 million bushels in May. U.S. ending stocks for 2017-18 came in at 495 million bushels versus 480 million bushels in May. This is in line with the pre-report average estimates, but there was large range in estimates that were from 420 million bushels to 759 million bushels.

Brazil's production came in at 114 million metric tons versus 111.6 million metric tons in May. This was similar to CONAB 's number of 113.9. Argentina's production is at 57.8 million metric tons versus 56.8 in May.

World ending stocks for 2016-17 were raised to 93.2 million metric tons versus 90.1 million metric tons in May and higher than pre-report estimates. 2017-18 world stocks also increased to 92.2 million metric tons versus 88.8 million metric tons and almost 3 million metric tons higher the pre-report estimates.

We will see a different story in the next CFTC report, as short covering should have trimmed away at the funds heavy short positions. Ahead of this recent hot dry weather, the May 30 CFTC report showed funds increased their record bearish combined positions of soybeans, soy oil and soybean meal to around 156,000 futures and options contracts. The previous record short position of 106,000 contracts was set the week prior.

Soybean weekly export inspections were 10.2 million bushels for the week ending June 1. This is above 3.6 million bushels for the same week a year ago. Inspections for 2016-17 total 1.877 billion bushels, up 17 percent from the previous year. Weekly export sales of soybeans showed a total of 14 million bushels with 5.8 million bushels for the 2016-2017 marketing year. Total sales are at 2.153 billion bushels, 5 percent above USDA's May demand projection of 2.050 billion bushels.

Canola

For the week ending June 8, canola July futures in Winnipeg were up $13.30 Canadian to $513.20 Canadian per metric ton. The Canadian dollar traded at 0.7408. This brings the U.S. price to $17.25 per hundredweight.

• Velva, N.D., $17.26 per hundredweight for June through July

• Enderlin, N.D., $17.93 for June through July

• Hallock, Minn., $17.68 for June and $17.75 for July

• Fargo, N.D., $17.50 for June, $17.45 for July

The northern parts of the Canadian Prairies are still wet, and in the south they have not had enough rains. This weather has traders keeping a weather premium in the canola market.

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 bid is at $2.40 in New Salem, N.D.

As of June 5, barley plantings are at 99 percent nationally versus the five-year average of 96 percent planted and 100 percent planted last year.

Barley conditions are at 69 percent good/excellent versus 78 percent last year.

Durum

Cash bids for milling quality durum are $5.50 in Berthold and at $5.75 in Dickinson, N.D.

Sunflower

Big supplies and strong deliveries by producers are keeping prices for oil-type sunflowers down about 10 percent from a year ago.

Cash sunflower bids in Fargo were at $15.25 for June and $15.25 for July.

For the week ending June 8, soybean oil was 76 cents higher at $31.77 on the July contract.

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