Markets have bullish reaction to USDA report
Wheat The wheat markets experienced follow-through buying after setting multi-year lows last week and appear to be forming a bottoming formation. The U.S. dollar largely traded sideways as the September contract nears expiration. The September Wo...
The wheat markets experienced follow-through buying after setting multi-year lows last week and appear to be forming a bottoming formation. The U.S. dollar largely traded sideways as the September contract nears expiration.
The September World Agricultural Supply and Demand Estimates report was essentially neutral, as U.S. ending stocks for 2019-20 were left unchanged at 1.014 billion bushels. World ending stocks for 2018-19 were increased 1.7 million metric tons to 277.2 million metric tons and world ending stocks for 2019-20 were increased 1.1 million metric tons to 286.5 million metric tons. Both world numbers were slightly higher than pre-report average estimates. Noticeable world revisions were a 2 million metric tons production cut to Australia, 1.5 million metric tons cut to Russia and a 500,000 metric ton cut to Ukraine.
ABARES cut Australian wheat crop estimates to 19.2 million metric tons, down 2.7 million metric tons from a previous estimate. Australian dryness is expanding with 65% of the primary wheat growing region affected by drier than normal conditions. In addition to Australia being dry, wheat regions in Brazil and Ukraine are also becoming drier.
Weekly wheat export sales were at the top end of trade expectations at 612,000 metric tons (22.4 million bushels). Total commitments of 441 million bushels are running 23% above year ago pace. Over the first 14 weeks of the marketing year, wheat sales have averaged 16.2 million bushels per week. Weekly export inspections were at the low end of expectations at 402,000 metric tons (14.8 million bushels). This was the lowest total in eight weeks. Total exports of 257 MB are running 23% ahead of last year's pace.
Russian wheat prices declined for the sixth consecutive week to $186.50 per metric ton for 12.5% protein. This was down $2.50 per metric ton from the previous week. This is the lowest level since the fall of 2017. Russian wheat exports are running 12.3% behind year ago levels for the first quarter.
The northern spring wheat belt remains wet and cool through the remainder of this week with 25% of the crop remaining to harvest. Forecasts show a return to normal after Sept. 21. There are a number of quality problems with this year's crop including scab, high vomitoxin levels and low falling numbers due to this season's higher than normal moisture. These problems will only intensify with the 25% of the crop remaining to harvest.
For the week ending Sept. 12, December contracts for Minneapolis wheat were up 13 cents at $5.0725, up 20 cents at $4.8375 for Chicago wheat, and up 10.25 cents at $4.035 for Kansas City wheat.
Corn futures saw a slightly positive reaction to the slightly bearish September USDA report for corn. The USDA lowered yields and production, but not as much as the trade was expecting or hoping for.
The USDA also surprisingly raised 2019-20 ending stocks 9 million bushels by raising the beginning stocks 85 million bushels. The beginning stocks number comes from an increase of carry over corn from the 2018-19 marketing year. The USDA also lowered ethanol corn use 25 million bushels due to poor margins and uncertainty around the future negotiations for the Renewable Fuels Standards.
The USDA lowered corn yields 1.3 bu/acre to 168.2 bu/acre vs the August report number of 169.5. Pre-report estimates were at 167.2 bu/acre with a range of 163 bu to 171.5 bu/acre. Production was lowered 102 million bushels to 13.799 billion bushels versus pre-report expectations of 13.672 billion bushels. The USDA was at 13.901 billion bushels in August.
Average 2019-20 U.S. ending stocks came in higher than expected at 2.19 billion bushels, up 9 million bushels vs USDA's August report. The average private estimates for ending stocks was at 2 billion bushels. Pre-report estimates ranged from 1.57 billion bushels to 2.7 billion bushels. 2019-20 world ending stocks were lowered 1.4 million metric tons and came in at 306.3 million metric tons versus pre-report estimates at 303.2 million metric tons. The USDA's August number was 307.7 million metric tons.
Temps are warming up across the eastern Midwest that is giving its corn a boost, but it is staying cool and wet in the Western half. The trade does not seem concerned about frost or maturity yet. They are in a "prove it" mode and need to be shown that this crop isn't going to make it to full maturity or that excess wetness will affect yields.
Corn conditions on Sept. 9 were much lower than expected and were decreased 3% to 55% good to excellent. The trade was expecting conditions to remain unchanged. Just shy of 10 million acres across the Midwest was still not at dough stage as of Sept. 8.
As of Sept. 9, corn dough was at 89% versus the five-year average of 97% and 99% last year. Corn dented was only at 55% versus the five-year average of 77% and 84% last year. Corn mature was at 11% versus the five-year average of 24% and 33% last year.
December corn futures made new contract lows this past week with futures trading down to $3.5225. Major support below $3.5225 will be the December '18 futures contract lows of $3.425 that was set Sept. 18, 2018.
It is amazing to think we got within 10 cents of last year's December '18 contract lows, when at this time last year we knew a record crop was most likely coming. The December '18 futures contract only got back up to $3.79 by the time the contract expired on Dec. 10 after these contract lows were made.
Resistance will be the top end of the trade gap left between $3.88 and $3.9275 that was made on Aug. 13.
Soybean futures finally saw a strong week as there was some rare positive news. The USDA report was bullish, especially in the ending stocks number.
The White House and China also are pretending to play nice by withholding additional tariffs until after the next round of negotiations that is expected in early October. President Trump extended his deadline to raise tariffs until Oct. 15 vs the initial Oct. 1 date.
Wet weather across the Midwest also may be giving the market a boost. We are hearing more reports of white mold popping up because of excess moisture, but it is too soon to know how widespread this problem is.
The USDA lowered the yield 0.6 bushels to 47.9 bushels per acre compared to the USDA's 48.5 August number .Pre-report estimates for soybean yields was at 47.2 bushels per acre. These pre-report estimates were unreasonable and it was a surprise to think that they expected the USDA to lower yields more than a bushel. The range was 46 to 49 bushels per acre. Production came in at 3.633 billion bushels vs pre-report estimates of 3.577 billion bushels and USDA's 3.68 billion bushels in August.
2019-20 U.S. ending stocks came in 115 million bushels lower at 640 million bushels versus pre-report expectations of 660 million bushels. The USDA in August had ending stocks at 755 million bushels. Pre-report estimates ranged from 565 million to 800 million bushels. 2019-20 world ending stocks are at 99.2 million metric tons versus pre-report expectations of 100.1 million metric tons. The USDA's August number was 101.7 million metric tons. Estimates ranged from 97 million metric tons to 102.5 million metric tons.
As of Sept. 9, 8% of the U.S. soybeans still hadn't set a pod, which is about 6 million acres. Soybeans blooming was close enough to 100% that it is not reported in the weekly updates anymore. The week prior, 4% of the nation's soybeans weren't even blooming by Sept. 1.
As of Sept. 9, soybean crop ratings were unchanged at 55% good or excellent compared to 68% last year; 33% of the crop is rated fair and 12% is rated poor. Average analysts were also expecting steady conditions.
Reuters has been reporting about dry weather in Brazil. Even though it is early in the season and too early to get excited about, dry weather in Brazilian states like Paraná and Mato Grosso is slowing the pace of soybean planting early in the season. Last year the Parana they were approximately 9% planted at this time. But this year Paraná there has not been much if any rainfall before or expected before Sept. 20th. After a prolonged drought, rains in the beginning of September have not been enough to increase soil moisture.
Reuters reported late in the trading day on Sept. 12 that "Chinese importers bought at least 10 cargoes of U.S. soybeans today, about 600,000 metric tons (22 million bushels. Shipments are expected out of the Pacific Northwest from October to December, according to trader with direct knowledge of the deals." This most likely is a goodwill purchase ahead of the talks next month in Washington.
First resistance is the 1.5 month high of $8.9675 set on Aug. 13. Major resistance is at $9.3125 on the weekly chart. On the daily charts, resistance is $9.365 and then the five-month high of $9.48 for new crop soybeans that was set June 18.
New support is $8.525 that was the recent low set on Aug. 28. The November contract low of $8.155 set May 13 recovery is major support after this.
For the week ending Sept. 12, November Canola was up $5.10 at $447.10 metric ton Canadian. The Canadian dollar was down .0025 at 0.7566. This brings the U.S. price to $15.34 per hundredweight.
• Velva, N.D., $14.38 per hundredweight, Oct. $14.38
• Enderlin, N.D., $14.14 per hundredweight
• Hallock, Minn., $14.14 per hundredweight, Oct. $14.66
• Fargo, N.D., $14.60 per hundredweight, Oct. $14.55
Cash feed barley bids in Minneapolis were at $2.50, while malting barley received no quote. Berthold, N.D., bid is $2.75 and CHS Southwest New Salem, N.D., bid is $3.00.
Cash bids for milling quality durum are $4.75 in Berthold, N.D., and at
$4.85 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $18.50; Oct. $17.40
For the week ending Sept. 12, soybean oil was up 55 cents at $29.01 on the October contract.