MARKETS: Positioning ahead of USDA report
WheatWheat started hot March 14, but the rally lost steam the rest of the week, as most of the negative weather has been built in. We saw five-week highs in wheat on March 14, but the crop has backed off those highs. Large rains in eastern Texas ...
Wheat started hot March 14, but the rally lost steam the rest of the week, as most of the negative weather has been built in. We saw five-week highs in wheat on March 14, but the crop has backed off those highs. Large rains in eastern Texas and Louisiana have caused concern in the southeast states of flash floods and too much moisture. Dry areas in the west have missed the rain. The U.S. Department of Agriculture reported a previous sale of 100,000 metric tons of U.S. hard red spring wheat to unknown destinations for 2015 to ’16 went to China. The news had a bullish effect on Minneapolis wheat prices to start the week. For the week ending March 17, Minneapolis lost 5.5 cents, Chicago lost 13.25 cents, and Kansas City was down 12.25 cents.
There is a wait-and-see approach with weather on the Plains. Dry weather and winter kill concerns have not changed the past few weeks, and have been the leading factor in the recent bullish run. We saw the U.S. dollar drop, and that has given grain markets a boost. 100-point drops for the dollar on March 16 and March 17 was not enough to keep wheat prices from falling. Kansas City wheat fell 13 cents on March 17 after the weather service predicted above-average rainfall for April in the dry Plains areas. We will have to see if this plunge in the dollar can spark purchases of the U.S.’s high-quality wheat.
Wheat exports continue to struggle this year, and reports from USDA did not change that. Export numbers continue the bearish trend of poor exports. Total exports in 2015 to ’16 are down 16 percent from a year ago and well behind pace of the lower number the USDA projected for this year.
Falling production estimates for the world’s winter wheat will lower stocks, but there is still almost 2 billion bushels of wheat stocks globally.
Corn traded marginally higher for the week, despite hopes a weaker dollar would push up trade. The first half of the week saw little movement, with March 14, 15 and 16 each closing within a penny of unchanged, and net gains of only a quarter cent. We did not get much direction from overnight trading. Day trade moved up prices. March 17 saw mixed trade pullback on positive overnight trade.
After March 16 news that the Federal Open Market Committee will leave interest rates unchanged at 0.25 percent to 0.5 percent, and reduce the number of rate hikes this year from four to two, trade was expected to be stronger by virtue of a falling dollar - the U.S. Dollar Index lost about 1 point March 16 after the report, and lost again March 17, placing the dollar at about 94.75. This and lowered expectations for economic growth and inflation caused the dollar to drop drastically after the report. Fundamental pressure was reintroduced into trade, and prices lost traction.
The ethanol production report came out March 16. Production was pegged at 6.99 million barrels, up 2.15 percent from the previous week and up 5.49 percent from last year. Stocks fell to 22.85, down nearly 2 percent from the previous week, but still high. Corn use was up more than 2 percent at 104.90 million bushels, bringing cumulative use up to 2,817 million bushels. Corn use now needs to average only 97.97 million bushels per week to meet USDA’s estimate of 5,225 million bushels.
Export inspections and sales were mixed. The March 14 export inspections report indicated corn exports were 31.7 million bushels, 18 percent lower than the previous week but 9 percent above last year. Total shipments have now reached 651.3 million bushels, 19 percent behind last year, compared with USDA’s estimate of an 11 percent decrease year-to-year. March 17 export sales were 50.7 million bushels, with 48.3 million bushels for this marketing year. This number is up 5 percent from the previous week, and 17 percent from the previous four-week average. Total sales for 2015 to ’16 are now up to 1,183 million bushels, 17.7 percent behind last year. USDA estimated a 9 percent decrease.
Soybeans didn’t take any direction to start the week, with a stronger Brazilian real and South America’s swift harvest progress fighting to take control of the price direction. The Brazilian currency continues to be near its six-month high, helping shrink the price difference between U.S. and South American soybeans for export.
A favorable weather forecast in Brazil will keep harvest ahead of pace, and is not favorable for soybean futures. But political and economic uncertainties know how to move the markets. For the week ending March 17, soybeans were up 2 cents.
Soybeans took a step back March 15, as we saw profit-taking after reaching three-month highs. We received reports the soybean harvest is ahead of the five-year pace in Brazil, and Brazil is 57 percent harvested for soybeans.
A nice run in the real has been helping shrink the price difference between U.S. and South American soybeans for export. National Oilseed Processors Association soybean crush numbers for February came out March 15. The average estimate for crush was 138.8 million bushels, compared with 147 million last year and 150.5 million last month. NOPA crush came in at 146.18, lower than last month, but higher than analyst estimates.
May soybeans closed higher later in the week, holding on to a gradual uptick as we come off a more than 40-cent rally the past few weeks. USDA announced 3.7 million bushels (100,000 metric tons) of U.S. soybeans were sold to unknown destinations for 2015 to ’16. The sale is welcome news, but more is needed to show the U.S. can stay competitive in that global market.
USDA will release quarterly ending stocks and acreage reports March 31.
Soybean weekly export inspections were 28.2 million bushels for the week ending March 10. Inspections for 2015 to ’16 total 1.480 billion bushels, which is down 7 percent from the previous year, but ahead of pace needed for USDA estimates.
Soybean export sales were 31.6 million bushels for the week ending March 10. That brings marketing year totals to 1.595 billion bushels, 8 percent behind last year’s totals of 1.761 billion bushels for the same week last year.
Canola futures, as of March 17, were up about $3.10 (Canadian) for the week, at $466.50 per metric ton (Canadian) for the May contract. The Canadian dollar gained 0.0135 at 0.7698. This brings U.S. prices to $16.29 per hundredweight a 34-cent gain for the week.
Cash bids in Velva, N.D., finished the week up 43 cents at $15.97 per hundredweight for March and April. Enderlin, N.D., bids were up 37 cents at $16.42 per hundredweight. Hallock, Minn., bids were up about 30 cents at $16.17 per hundredweight for March and $16.35 for April, and up about 60 cents at $15.88 per hundredweight for September.
Prices have improved. Charts show May canola futures could see resistance at $475 per metric ton (Canadian), but beyond that, there is no resistance until $490. November futures see chart resistance at $485, then relative freedom until $495. Cash prices have jumped because of improving canola futures and the improving Canadian dollar. The Canadian dollar was below 0.6900 mid-January, but has risen. As long as oil shows stability, the Canadian dollar should continue to improve.
Cash sunflower bids in Fargo, N.D.,
were up 10 cents at $16.05 per hundredweight for March and April.
Soybean oil net gained 1.29 cents for May contracts, bringing the price up to $33.40 per hundredweight as of March 17 afternoon.