Tariffs dominate the news

Wheat The wheat complex traded sharply higher April 3 in reaction to the lowest winter wheat condition ratings since 2004 and the second lowest in the past 20 years. Kansas City led the way with 24 cent gains at one point. April 2 was the first w...

Erin Brown / Grand Vale Creative


The wheat complex traded sharply higher April 3 in reaction to the lowest winter wheat condition ratings since 2004 and the second lowest in the past 20 years. Kansas City led the way with 24 cent gains at one point.

April 2 was the first week ratings were compiled across the states, but Kansas, Oklahoma and Texas have been giving weekly ratings updates since the end of February. Good to excellent ratings have been in the low teens the past six weeks compared to the low 40s a year ago. It is unlikely that 2018 crop yields will reach 2017 levels.

The sum average for the 18 major winter wheat production states now stands at 32 percent good to excellent versus 51 percent last year. Fair is 38 percent versus 35 percent last year and poor to very poor is 30 percent versus 14 percent last year. The Pacific Northwest states appear to have a good crop coming, so perhaps that can offset a potential train wreck coming in the southern Plains. More importantly, Texas and Oklahoma have given maturity scores in the past few weeks.

Although we are not out of the realm of five-year averages, we are certainly well behind 2017. In Oklahoma the winter wheat crop is 46-percent jointed compared to 63 percent last year and 54 percent for the five-year average. In Texas the crop is 11 percent headed compared to 30 percent last year and 12 percent for the five-year average. Delayed maturity pushes the crop into the greater heat of the summer and would likely lead to further yield reductions.


According to the U.S. Department of Agriculture, North Dakota is estimated to plant 6.4 million acres of spring wheat, or 1.05 million more than 2017. Minnesota is looking at 440,000 acres more. The numbers are probably accurate for surveys that were conducted prior to March 1.

For farmers in the western Dakotas who are in drought management plans, it would only make sense to intend to plant more spring wheat acres. But I think the mood has changed in the past 30 days with both corn and soybeans trading near recent highs. I suspect we could lose a good portion of USDA's increased estimate given the March price drop and the prospects of delayed planting in northern tier states.

The eight-to-14-day forecast remains much colder and slightly wetter for the Dakotas and Minnesota. Expect planting delays for northern spring wheat. The southern Plains remain dry and cold, which is causing freeze warnings in areas and wildfire warnings due to low humidity and high winds from Nebraska through the Texas Panhandle. Temperatures in the mid 20s were recorded as far south as eastern Oklahoma.

Weekly export sales for all wheat totaled 11.4 million bushels with 4 million bushels for the 2017-18 marketing year. This puts total marketing year sales at 842.1 million bushels, 15 percent below the previous marketing year. Marketing year shipments total 694 million bushels, 9 percent below the previous year.


It has been a tough week for corn and ethanol from the federal Environmental Protection Agency and the courts. On April 3 the EPA presented plans to roll back U.S. vehicle mileage standards that call for cars and light duty trucks to average 50 miles per gallon by 2025. There was also a ruling from a federal bankruptcy court that stated a recent refiner in Philadelphia that filed for bankruptcy would not be responsible for roughly 70 percent of its Renewable Identification Number obligations for years 2016 and 2017.

It was reported April 4 that the EPA granted a waiver to a larger oil refining company, Andeavor, from complying with blending requirements set forth in the Renewable Fuels Standard. Reuters reported that the waiver applies to the three smallest of the company's 10 refineries. Andeavor posted profits of $1.5 billion last year. D-6 RINS have lost 30 percent in value in the past week on these announcements. In 2017 the EPA granted 25 such exemptions versus an average of six exemptions in previous years.

While everybody was focused on a potential trade conflict with China, an article from JP Morgan stated that North American Free Trade Agreement countries are moving closer to a tentative agreement. Another article from Bloomberg stated that President Donald Trump wants to have a tentative agreement in place by the Summit of America's conference in Peru April 13-14. The U.S. did soften on one of its demands regarding automobiles. If a NAFTA agreement were realized, it would add to market certainty.


A few private analysts estimate Argentina corn production at 32 million metric tons versus current USDA forecasts of 36 million metric tons. Those same analysts are predicting Brazil corn production at 90 million metric tons versus USDA's 94.5 million metric tons.

Weekly ethanol production was 7.266 million barrels, 1.86 percent higher than last year on improved plant profit margins. Stocks were 22.425 million barrels as of March 30, down 5.4 percent versus last year. Weekly crude oil stocks declined much more than trade expected at 425.33 million barrels. Gasoline stocks saw a modest decline which was expected at 238.48 million barrels. The E85 to E10 price spread has narrowed in the Fargo, N.D., market to around 65 cents per gallon after being in the 80 cent range most of the winter.


After a bullish surprise in the USDA's planting intentions report on March 29, soybean futures took a step back as the trade took the long weekend to digest the acreage numbers. A lot has changed the past month since the USDA got their surveys back from farmers (March 1). Farmers were asked to project their planted acres early this year for the coming growing season, but prices and weather have changed since then.

Soybeans and corn prices have seen a nice spike this past month and spring wheat prices have slowly been getting weaker. It is likely the soybeans bought back a few acres from spring wheat in this time period. It is also looking like most of the Midwest may have a slow start to the planting season. Temps are forecast to stay chilly the next couple weeks with snow also falling this week. This could push more acres to soybeans if weather remains uncooperative, especially in the Upper Midwest.

China has vowed in statements from the Commerce Ministry to take measures of the same strength and same scope against U.S. goods. They did not give a date when these tariffs would go into effect, but the U.S. announcement April 3 of a $50 billion list of Chinese goods has a period of comments and feedback that would allow them to go into effect in May (or later) if approved.

So right now the trade war of adding 25 percent tariffs on a list of goods has been a series of announcements by both governments to put these tariffs in place. Nothing is set in stone yet, and this may just be the start of negotiation tactics from both countries. This is definitely something to watch and will cause volatility in the commodity markets until details get hammered out between the U.S. and China.

The USDA reported the February U.S. soybean crush was 165 million bushels, above average market expectations of 163.5 million bushels (estimates ranged from 162.5-164.9 million). This is a new record for the month, up 8.9 percent from last year's February crush of 151.4 million bushels. Soy oil stocks came in at 2.425 billion pounds versus the average trade estimate of 2.35 billion pounds.



For the week ending April 4, May canola futures in Winnipeg were up $5.70 Canadian at $528.40 Canadian per metric ton. The Canadian dollar was up to .7822. This brings the U.S. price to $18.75 per hundredweight.

• Velva, N.D., $18.56 per hundredweight, September at $17.60.

• Enderlin, N.D., $19.30 per hundredweight, September at $18.14.

• Hallock, Minn., $18.70 per hundredweight, September at $17.83.

• Fargo, N.D., $19.15 per hundredweight, September at $18.10.


Cash feed barley bids in Minneapolis were at $2.85, while malting barley received no quote. The Berthold, N.D., bid is $2.60 and the CHS Southwest New Salem, N.D., bid is $2.90.


Cash bids for milling quality durum are $6 in Berthold and at $5.75 in Dickinson, N.D.


Cash sunflower bids in Fargo were at $17.80, October at $18.60. For the week ending April 4, soybean oil was down 19 cents at $31.68 on the May contract.

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