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Weather, politics make market movement

Wheat The European Commission's crop monitoring group Mars said European crops saw only slight damage from the recent cold snap. Frost damage has been minor in the southeastern areas that experienced the most cold. Additionally, Mars said snow co...

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i-Stockr/iStockphoto

Wheat

The European Commission's crop monitoring group Mars said European crops saw only slight damage from the recent cold snap. Frost damage has been minor in the southeastern areas that experienced the most cold. Additionally, Mars said snow cover prevented any notable damage in the Ukraine. This report set the tone for the week's lower wheat trade.

After a week of mostly lower prices, wheat contracts hit technical support levels in Chicago and Kansas City. A very high 853,400 metric tons export sale for 2017 to '18 gave Minneapolis the largest boost during the Jan. 26 trade. This was the largest wheat sale number since 2013. It appears at least short term that Minneapolis will stay above the three-month post-harvest range of $5.15 to $5.45.

U.S. weekly export inspections were 10.1 million bushels for the week ending Jan. 19. This was above the 6.9 million bushels for the same week a year ago. Inspections for 2016 to '17 total 605 million bushels, up 26 percent from the previous year, and even with the U.S. Department of Agriculture's projected increase of 26 percent.

Export sales totaled 35.2 million bushels with 31.4 million bushels for the 2016 to '17 marketing year. This was above the 9.6 million bushels needed to be on pace with USDA's January projection of 975 million bushels. Weekly shipments of 10.9 million bushels were below the 19.5 million bushels needed in this week's report.

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Russian wheat prices increased last week an average of $1.50 to $2 per metric ton. This was primarily because of the strengthening ruble. At $185 per metric tons, this is the highest level in more than eight months. The ruble is trading at its highest level since July 2015. Egypt purchased 410,000 tons of wheat from Russia for March 1 to 10 shipment.

Basis levels had narrowed during the holidays and had started to widen back out as the futures market approached the $5.90 March level. Now that we have backed off to $5.60 levels we have seen basis narrow again in some locations. Clearly there is a combination of lack of farmer selling and demand for Minneapolis wheat with this type of action. Basis will typically improve into spring, but if the futures market continues its inversion and punches above $6 it might not have to if farmer selling occurs. We still like basis fixed contracts in this environment if a good historical level comes up in your area.

March Chicago support is $4.21 with $4.345 resistance. March Kansas City support is $4.285 with resistance at $4.445.

For the week ending Jan. 26, March contracts for Minneapolis wheat were down 2.25 cents at $5.66, down 1.25 cents at $4.27 for Chicago wheat, and down 2.75 cents at $4.4025 for Kansas City wheat.

Corn

Sell stops went to work after bouncing off the new six-month high on Jan. 25 of $3.71. Corn turned lower after hitting resistance and has given up some of the recent mini rally gains. Favorable South American weather continues to weigh on the row crop markets, but daily export sales are helping hold corn near the upper end of the range.

For the week ending Jan. 26, March corn was down 6 cents and December was down 4.5 cents.

Corn has found slow momentum upward the last two months as low prices have provided us with solid export demand and strong ethanol margins. So far in 2017, the nearby corn futures price has ranged from $3.55 to $3.70, with an average price that is about the same as last year's January to March 2016 March futures average price.

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USDA bulletin has been continuing the trend of fresh sales announcements almost daily. These daily sales continue to hold corn near the upper end of the recent six-month trading range. Besides export and ethanol strength, there are very few other fundamentals currently helping prices to trend higher.

Ethanol production for the week ending Jan. 20 averaged 1.051 million barrels per day. This is down 0.28 percent compared to last week and up 9.37 percent compared to last year. Stocks were up 2.90 percent compared to last week and up 1.36 percent compared to last year. Corn used in last week's production is estimated at 110.36 million bushels. Corn use needs to average 98.533 million bushels per week to meet this crop year's USDA estimate of 5.3 billion bushels.

Soybeans

Soybeans continue to trend downwards as the Argentina short term weather pattern has been improving across South America. The Argentine soybean crop looks to be recovering following a week of warm and dry weather, and the amount of flood damage is still an ongoing debate. The trade will continue to watch South America as Brazilian rains over the next week could give soybeans a nice finish and Argentina precipitation is forecast to hold off until the start of February.

China is and will continue to be the wild card for the soybean markets. It will be something to watch as the current administration and China continue to iron out their differences. There are also concerns from ag groups as Trump announced a cancellation of the Trans-Pacific Partnership and is also looking to renegotiate NAFTA.

Another factor to watch is to what degree undersold Brazilian soybean farmers will step up their selling pace at harvest. They are currently 37 percent sold compared to a 44 percent average. The popular guess is they will continue to hold tight as they wait for future tax breaks. With hectare losses due to the recent heavy rains, the Buenos Aires Grains Exchange forecasts Argentina's 2016 tp '17 soy crop at 53.5 million metric tons compared to 56 million metric tons the previous crop year.

Canola

For the week ending Jan. 26, canola March futures in Winnipeg, Manitoba, were up $0.70 (Canadian) to $520.30 per metric ton (Canadian). The Canadian dollar traded up 0.0133 at 0.7641. This brings the U.S. price to $18.03 per hundredweight.

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Cash bids in Velva, N.D., were $18.02 per hundredweight for January and 18.02 for February to March. Enderlin, N.D., bids were $18.88 for January and $18.88 for February to March. Hallock, Minn., bids were $18.21 for January and $18.28 for February. Fargo, N.D., bids were $18.55 for January and $18.60 for February.

Barley

Cash feed barley bids in Minneapolis were at $2, while malting barley received no quote. The Berthold, N.D., bid is $2 and CHS Southwest bid is at $2.50 in New Salem, N.D.

Durum

Cash bids for milling quality durum are $6.50 in Berthold, N.D., and at $6.50 in Dickinson, N.D.

Sunflowers

Cash sunflower bids in Fargo, N.D., were at $14.70 for January and $15 for February.

For the week ending Jan. 26, soybean oil was 65 cents lower at $34.47 on the March contract.

Related Topics: MARKETSCROPS
What To Read Next
Mikkel Pates set the standard for agricultural journalism during his 44-year career in the region, working for Agweek, The Forum and the Worthington Globe.
Mikkel Pates reflects on his time as an ag journalist in a three-part series.