Supply report hurts markets

Wheat The wheat markets traded sharply lower in reaction to the July 11 monthly WASDE report that showed higher than anticipated production. Minneapolis traded down to $7.46, the same level it touched during the key reversal day of July 5. $7.45 ...



The wheat markets traded sharply lower in reaction to the July 11 monthly WASDE report that showed higher than anticipated production. Minneapolis traded down to $7.46, the same level it touched during the key reversal day of July 5. $7.45 Sept can now be considered support and $8.00 resistance.

USDA increased all winter wheat production to 1.279 billion bushels, up 29 million bushels from the June estimate, which was the high end of the range for pre-report estimates. This forecast places a U.S. winter wheat yield at 49.7 bushels per acre, up 0.8 bushels from June. Spring wheat came in at 423 million bushels, slightly higher than the pre-report estimate, but down 21 percent from last year's crop.

In looking further into the report, spring wheat was listed at 385 million bushels and white wheat was listed at 254 million bushels. On the summary page spring wheat was listed at 423 million and white wheat was listed at 216 million bushels. The end number of 1.760 billion bushels still adds up, but the classification was 38 million bushels incorrect in the summary. 385 million bushels helps us avoid a disaster spring wheat crop but it does trim ending stocks from 235 million in 2016-17 to 122 million projected for 2017-18.

We came into this year with 235 million ending stocks after 572 million usage for a very comfortable stocks to use ratio of 41 percent. Usage throughout the years is consistent for spring wheat and projections for next year are 561 million. With an ending stocks number projected at 122 million this would still lead to a comfortable 21.7 percent stocks to use ratio. This is the number the market is currently trading and the primary reason Minneapolis contracts have had a tough time punching $8.00 on a recovery bounce.


The real question now is are these numbers accurate? There was no abandonment number included in this report with the ongoing western Dakotas and Montana drought. The report included a disclaimer "Area harvested and yield for other spring wheat and durum projected using 10-year harvested-to-planted ratios by state and 1985-2015 yield trends by state (except for Arizona, California and Idaho durum)." We would expect the abandonment number to be included in the August report.


Once again, the USDA didn't do farmers any favors as they kept the trend yield unchanged at 170.7 bushels per acre and increased production 190 million bushels in this month's WASDE report. Some of this increased production is from the higher than expected acres number that they came out with in the June 30 report. The USDA typically doesn't get too aggressive with their yield and production changes in the July report, and they didn't sway very far from that thinking this time either. For the week ending July 13, September corn was down 22.5 cents and December corn was down 20.75 cents.

There was aggressive post report selling as higher stocks and rain the past couple days in the Corn Belt put pressure on these markets. We are still looking at a hot 7 day forecast for much of the Midwest starting the weekend of July 15. The 8-14 day forecast is starting to take the extreme heat out of the Midwest and is putting in a better chance for precipitation.

With the cold, wet spring, replant acres, and with a hot dry July and extended forecast, the trade (and Progressive Ag) expects a less than 170 bushel per acre crop this year. The USDA isn't on board with that yet. Weather the next couple weeks will tell us who is on the right track with their numbers. The trade will be watching closely to see if there is enough of a weather scare during pollination to drive this market back to contract highs and then back to the past two year highs of the $4.40 to $4.50 range. Our recent high of $4.1725 on July 10 for December corn is strong resistance.

The USDA kept corn yields unchanged at 170.7 billion bushels, higher than the average pre-report corn yield estimate of 169.6 bushels per acre. Ranges were from 166.8 to 170.7 bushels per acre. 2017-18 U.S. ending stocks were slightly higher at 2.325 billion bushels versus estimates at 2.321 billion bushels and the June USDA number of 2.295 billion bushels. This is a 215 million bushels increase and we are now up to a 16.2 percent stocks to use. Corn production came in higher than expected at 14.255 billion bushels vs estimates at 14.126 billion bushels and 14.065 billion bushels in the June USDA report.

The Pro Ag yield model was half a bushel lower than the week prior and is quite a bit less than USDA's 170.7 estimate. The corn condition ratings on July 10 came in 3 percent lower in the good to excellent category, worse than the trade was expecting. Corn was rated 65 percent good to excellent versus 68 percent last week and 76 percent last year. The trade was expecting a 1 to 2 percent decrease. Corn was rated 10 percent poor to very poor versus 8 percent last week and 5 percent last year.



Soybeans sold off post USDA report after a two-week winning streak. It was a neutral report for soybeans as they kept yields the same, but lowered ending stocks. Soybeans were up 11 straight days and November soybeans were up over $1.40 from the lows we saw a little over 2 weeks ago. This was the longest consecutive winning streak since 2012. Soybeans then preceded to give back 60 cents from the highs we saw on July 11. Longs were taking profits as the weather service is starting to put more moisture in the heart of the Midwest in the extended forecast. For the week that ended June 13, funds liquidated 49,0000 short net positions of soybeans to around 70,000 contracts, down from 119,000 the week prior.

We will have to keep an eye on the 8-14 day forecast as they started to put more rain in the forecast for the upper midwest and southwest U.S.. The western midwest states are expected to stay hot and dry. We are starting to hear reports of too much rain in parts of the northeast midwestern, states like Wisconsin, Ohio and northern Illinois. It just goes to show how sporadic and random the weather has been this year. For the week ending July 13, August soybeans were down 23.5 cents. November 2017 soybeans were down 26.75 cents.

The July report typically doesn't have too many surprises, and the USDA didn't change that attitude this year. The USDA kept yields the same at 48 bushels per acre versus the average pre-report soybean yield estimate of 47.9 bushels per acre. Estimate ranges were from 47 to 49 bushels per acre. 2017-18 U.S. ending stocks were lower at 460 million bushels versus estimates at 473 million bushels and the June USDA number of 495 million bushels. U.S. production was increased 5 million bushels to 4.26 million bushels based on slightly increased harvested acres.

The crop ratings on July 10 showed a 2 percent decrease in good to excellent ratings, and continues to show spotty rainfall coverage. There is also increased chatter of short bean plants. On July 10, soybeans were rated at 62 percent good to excellent versus 64 percent good to excellent last week and 71 percent last year. Soybeans were rated 11 percent poor to very poor versus 9 percent last week and 6 percent last year. The Pro Ag yield model was slightly lower this week and is still lower than USDA's 48 bushel per acre estimate.


For the week ending July 13, November Canola futures in Winnipeg were down $15.50 Canadian to $502.50/metric tons Canadian. The Canadian dollar traded up .0092 at 0.7859. This brings the U.S. price to $17.91 per hundredweight U.S.

• Velva, N.D., $18.22 per hundredweight, new crop $17.76

• Enderlin, N.D., $18.08 per hundredweight, new crop $17.90


• Hallock, Minn., $18.47 per hundredweight, new crop $17.40

• Fargo, N.D., $19.35 per hundredweight, new crop $17.75


Cash feed barley bids in Minneapolis were at $2.05, while malting barley received no quote. Berthold bid is $2.00 and CHS Southwest New Salem is $2.40.


Cash bids for milling quality durum are $8.00 in Berthold and at $8.00 in Dickinson.

2017 U.S. durum production is estimated at 57 million bushels, down from 104 million in 2016. With a projected decline of 18 million bushels of usage for 2017-18 the stocks to use ratio will decline from 28.5 percent in 2016-17 to 24 percent in 2017-18.



Cash sunflower bids in Fargo were at $17.00. Oct. to Nov. $16.20 for the week ending July 13. Soybean oil was 35 cents lower at $33.13 on the August contract.

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