Rains in European wheat growing regions and the Black Sea region sent wheat contracts lower early in the week. Weekly crop condition ratings released May 15 point to an "average" U.S. winter wheat crop despite the western Kansas weather event.
As the corn market has been lulling us to sleep this winter with its 20 cent trading range, keep in mind that Chicago wheat ran 60 cents from Christmas to mid February and now back down to these late December levels. Traders have not had much luck selling sub $4.20 levels of Chicago and Kansas City the last 5 months and have turned long Kansas City the last few weeks.
The latest CFTC data showed funds increasing net longs from +512 to +13,692 in Kansas City and from +4,377 to +4,670 in Minneapolis. Funds remain net short Chicago at -107,892 but this was reduced 16,746 contracts. The same type of 60 cent run is not out of the question in Chicago if the funds decide to short cover on weather. Chinese wheat growing regions are experiencing hot and dry weather, as is Australia.
Wheat
Egypt purchased the first U.S. cargo of wheat in over two years. The 115,000 metric ton sale was part of a 295,000 ton purchase that also included Russia, Romania and the Ukraine. The U.S. offered at $185.40 per metric ton excluding freight. Russian offers were $198 per metric ton excluding freight as the strength of the Ruble has made their wheat more expensive.
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Minneapolis remains over $1.10 premium to Chicago and Kansas City pointing to a continued need for higher protein wheat in 2017-18. On May 18, Minneapolis floor bids delivered Chicago and beyond were down 6.25 cents to up 43.75 cents a rather wide range. Fifteen percent protein bids increased 3.75 to 28.75 cents signaling additional demand for higher protein.
Crop condition ratings released May 15 show 63 percent of the winter wheat crop is headed compared to 57 percent for the 5 year average. Winter wheat conditions are 51 percent good to excellent versus 53 percent last week and 62 percent last year. Poor to very poor conditions increased to 17 percent from 15 percent last week and 8 percent last year. Spring wheat plantings are at 78 percent compared to 73 percent for the 5 year average. Spring wheat emerged is at 40 percent compared to 44 percent for the 5 year average.
May 18 export sales totaled 23.5 million bushels including 9.1 million bushels for the 2016-17 marketing year. Weekly shipments of 24.7 million bushels were below the 39.2 million bushels needed in this week's report to stay on pace with USDA's revised May projection of 1.035 billion bushels. Outstanding sales totaled 127.6 million bushels, 58 percent larger than last year.
For the week ending May 18, July contracts for Minneapolis wheat were down 1.5 cents at $5.45, down 7.0 cents at $4.2575 for Chicago wheat, and down 13.25 cents at $4.26 for Kansas City wheat.
Corn
The corn market continues to lull producers to sleep as it has not found strength from weather concerns we have seen this spring. Corn futures continue to trade in the same 20 cent trading range we have seen for the past couple months. For the week ending May 18, July corn was down 5 cents and December corn was down 4.75 cents.
The U.S. and global equity markets and U.S. dollar index saw volatility in knee jerk reactions after both Trump and Brazil's President Temer were in the news for the wrong reasons. The U.S. equity markets were sharply lower as news of FBI Director James Comey putting together a memo of a conversation with President Donald Trump became front page headlines. The memos allegedly have Trump asking him to halt an investigation into Michael Flynn, the former national security adviser over Russian matters.
One would think focus would switch back to weather sooner than later. But as this past week continues to remind us, political turmoil is always front page news and will always have unexpected effects on global economics.
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The May 15 crop progress report showed that most of the U.S. caught up with corn planting progress after a slow start to the season. Corn plantings are at 71 percent nationally versus the 5-year average of 70 percent planted and 73 percent planted last year. Corn emergence is at 31 percent nationally versus the 5-year average of 36 percent planted and 41 percent emerged last year. The USDA will start national crop ratings for corn on May 22 at 3:00 p.m. central time.
The last Informa estimates for 2017 U.S. corn acres is now at 89.7 million acres, reducing corn acres 1 million acres from their prior forecast. The USDA May 2017 corn acres is at 90 million acres.
Ethanol production climbed over 1 million barrels per day for the second week in a row after a few weeks below that number. Weekly ethanol production increased 2.09 percent from last week to 1.027 million barrels per day. Corn use for ethanol was 107.84 million bushels, ahead of the 98.865 million bushels pace needed for USDA estimates.
Soybeans
Soybeans were silently displaying a little uptrend in futures prices since the beginning of April, even as wheat and corn prices have stayed to steady to slightly lower. Wet weather has been giving the bears concern as delays in planting progress is keeping farmers out of the field with the recent rains. Rains and cool weather over the next 10 days will delay plantings. For the week ending May 18, July soybeans were down 18.25 cents and November 2017 soybeans were down 15 cents.
News out of Brazil on May 18, shook up the markets and soybeans gave up most of their recent gains in one day that took the market a month and half to claw back up to. Soybeans dropped within 2 cents of the previous low of $9.41.
Our neighbors to the south, Brazil, threw our markets into a ruckus again. The Brazilian president of 8 months is caught up in a bribery scandal that sent the Brazil Real plummeting down 7 to 8 percent. One of the country's largest newspapers reported on May 17 that a secret recording exists of Brazilian President Michel Temer approving a bribe to a potential witness involved in the meat giant JBS scandal. JBS is the world's biggest beef exporter.
The drop in the Brazil Real triggered Brazilian farmers selling, as their Real was showing strength before this. Because of the recent strength in the Real, Brazilian producers have stayed undersold with their 2017 soy crop. Before this sharp Real decline, U.S. soybean export prices were staying competitive as the U.S. dollar has been weakening as of late.
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U.S. soybean plantings are at 32 percent nationally versus the 5-year average of 32 percent planted and 34 percent planted last year. Soybean emergence is at 8 percent nationally versus the 5-year average of 8 percent planted and 9 percent emerged last year.
Informa May 19 estimates 2017 U.S. soybean areas at 89.7 million acres, raising soy acres 1 million acre estimate from their prior forecast. The USDA May 2017 soybean acres is at 89.5 million acres.
Canola
For the week ending May 18, Canola July futures in Winnipeg were down $2.60 Canadian to $521.30 per metric ton Canadian. The Canadian dollar traded up .0061 at 0.7353. This brings the U.S. price to $17.39 per hundredweight U.S.
• Velva, N.D., $17.37 per hundredweight for May through July.
• Enderlin, N.D., $18.37 for May through July.
• Hallock, Minn., $17.58 for May and $17.81 for June.
• Fargo, N.D., $18.50 for May and $18.20 for June/July.
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• Canadian dollar value at low end of trading range.
• -23.3 percent old crop supplies from 2016 remain supportive.
• 22.4 million (+9.9 percent) Canadian intended acreage for 2017 is negative.
Barley
Cash feed barley bids in Minneapolis were at $2.05, while malting barley received no quote. Berthold bid is $2.00 and CHS Southwest bid is at $2.40 in New Salem, N.D.
As of May 14, 78 percent of the U.S. barley crop is planted compared to 79 percent for the 5 year average. Emergence is 42 percent compared to 50 percent for the 5-year average.
Durum
Cash bids for milling quality durum are $5.50 in Berthold and at $5.35 in Dickinson.
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Despite Canadian durum acreage down 17 percent at 5.14 million and U.S. durum acreage down 17 percent at 2.0 million, the U.S. stocks to use ratio is 47.2 percent.
Sunflower
Cash sunflower bids in Fargo were at $15.00 for May and $15.10 for June/July.
For the week ending May 18, soybean oil was 40 cents lower at $32.44 on the July contract.
