With no positive news, funds are record short

Wheat Wheat markets were under heavy pressure this week on Russian production estimate increases and favorable rainfall forecasts for the southern Winter Wheat Belt. SovEcon increased its 2019 Russian wheat crop production estimate to 83.4 millio...

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Mikkel Pates / Agweek


Wheat markets were under heavy pressure this week on Russian production estimate increases and favorable rainfall forecasts for the southern Winter Wheat Belt.

SovEcon increased its 2019 Russian wheat crop production estimate to 83.4 million metric tons versus 80 million metric tons. Germany's DRV agricultural COOP also increased German estimates slightly from 24.2 million metric tons to 24.4 million metric tons. This caused Matif wheat futures $190 per metric ton resistance to hold firm. French wheat futures reached $189.25 per metric ton and declined from there to $183.75 per metric ton.

Weekly crop progress ratings were unchanged for the overall average of 18 states from the previous week at 60% good to excellent, 31% fair and 9% poor to very poor. Soft red states of Ohio, Indiana and Illinois all improved 4% in good to excellent. Meanwhile, hard red states of Colorado declined 8% and Oklahoma declined 2%. Kansas improved 1% and Texas improved 4%. Winter wheat headed is at 6% compared to 9% for the five-year average. Soft red ratings are the lowest since 2007, while hard red ratings are the highest since 2010.

Spring wheat is 2% planted compared to 13% for the average. Idaho and Washington are lagging at 24% and 29% behind normal pace, respectively with no progress in the Dakotas and Minnesota.


Weekly inspections were 511,000 metric tons (18.8 million bushels) which was in line with expectations. Cumulative export inspections of 732 million bushels are down 4.5% from last year's 767 million bushels at this time. The US was $6 per metric ton higher than Russian and Ukrainian offers after freight to Egypt in a recent tender. Weekly export sales were within trade expectations at 317,700 metric tons (11.7 million bushels) for 2018-19 and an increase of 227,800 metric tons (8.4 million bushels) for 2019-20. Wheat export commitments now total 915 million bushels, up 8% from a year ago.

Eight- to 14-day forecasts at the end of the week showed an overall warming pattern with wetter conditions for all three major U.S. wheat belts.

Minneapolis and Kansas City futures hit new contract lows in April 16 trade. For the week ending April 11, May contracts for Minneapolis wheat were down 8 cents at $5.2325, down 20.25 cents at $4.4425 for Chicago wheat, and down 14.25 cents at $4.20 for Kansas City wheat.


Corn futures continue to grind lower as there is just no news to give this market any life. Old crop corn futures continue to test the lows that were set March 29, the day the U.S. Department of Agriculture surprised everybody with corn acres at 92.8 million. December corn is also only a couple cents off its contract lows of $3.8325 set Sept. 18.

The trade seems to have a short memory when it comes to market moving weather. They seem to be focused on last year when the Midwest had a wet cool April but ended up seeing a perfect May for planting and corn emergence. Will lightning strike twice? I guess farmers and the trade will have to wait and see. Farmers can put a lot of crop in the ground in a short time now days, but it is also very likely that we will have more prevent plant acres than last year.

The majority of the Upper Midwest received rain this past week that will likely delay planting for much of the Midwest. The Midwest forecast is also showing a chance of rain in the next seven days. The eastern Corn Belt has the highest chance of rain with a lesser chance for the west and central Midwest. Warmer temperatures are finally here and look like they may stay through the end of April. With this weather forecast, the trade may not get excited about delays until we see what the planting progress report on April 29 has to say.

As of April 14, corn planting progress was at 3% versus the five-year average of 5% complete. U.S. farmers were also 3% complete at this time last year.


With no positive news anywhere to be found, one can continue to hope these markets could be posed for a turnaround when times seem most gloomy and nobody expects it. It just can't come fast enough if these funds ever decide to start taking profits from their record short positions. As of April 9, managed funds were a net short 272,000 contracts, 35,000 more contracts than the week prior.

Everybody knows that the funds have been holding these short positions for a couple months and are waiting for them to flip positions. This may be why the funds are holding out as long as they can. There is also likely to be heavy farmer selling pressure if we see a 15-20 cent rally. This could likely keep the ceiling lower unless we really see a major weather event going forward. Old crop basis levels are also likely to widen if we see a rally.

The crude oil futures rally has seemed to stall out at the $64 levels. Reuters reported that the West Coast will import a record amount of gasoline for the month of April from Europe as area refinery shutdowns have increased prices. Ethanol production for the week ending April 12 averaged 1.016 million barrels per day. Weekly ethanol production increased 1.4% from last week and is up 0.69% from last year. Ethanol stocks are at 22.676 million barrels, down 2.23% from last week but up 6.24% versus last year. Corn use for ethanol was 104.8 million bushels, near the 104.875 million bushels pace needed for USDA's estimates of 5.5 billion bushels.

Last week's export shipments of 48.2 million bushels were above the 46.8 million bushels needed each week to reach the USDA's export estimate of 2.3 billion bushels in 2018-19. Corn export inspections for 2018-19 now total 1.257 billion bushels, up 14% from the previous year. Corn export commitments total 1.759 billion bushels in 2018-19 and are down 9% from a year ago.

The March 29 May contract low of $3.56 is support. If we break through this level, the two year front month low of $3.285 is major support. The recent run up to $3.8075 that we saw on March 22 is major resistance.


Soybeans futures had a bad week and saw their lowest close of 2019. Trade rumors and then no follow through to the rumors continue to keep pressure on the markets. A slow start to the planting season and spring wheat prices are also putting doubt in the trades mind that soybean acres will be as low as the USDA is estimating.

Soybean exports continue to stay well behind the USDA's expected pace for this marketing year. There were also no sales to China in the last two weekly export sales reports but there were cancellations to unknown (most likely China). Any further delays of a signed trade deal will only put the U.S. further behind its average pace. Other countries continue to take advantage of our trade spat with China and are willing participants to take more of our market share. Export inspections for 2018-19 now total 1.126 billion bushels, down 28% from the previous year. Soybean export commitments total 1.627 billion bushels in 2018-19 and are down 18% from a year ago.


The Wall Street Journal reported that a U.S. trade team lead by Robert Lighthizer is tentatively set to travel to Beijing for more talks the week of April 29. The hope is that a signing ceremony is possible in late May or early June if they put the finishing touches on a deal. The trade is in a "prove it" kind of mood that a deal is actually ready to being signed and that it is good for grains.

The 25% tariff on U.S. soybeans is not guaranteed to get lifted right away even with a deal in place, so that is still a concern to future exports.

The latest talk is that China is starting to be more interested in increasing pork and chicken imports due to Swine Fever. Total Chinese pork purchases of U.S. pork for the year are at 166,000 metric tons versus just 20.4 metric tons last year. This doesn't sound favorable for their soybean and soybean meal imports to China going forward, but could be favorable for domestic usage.

The March National Oilseed Processors Association crush came in slightly larger than expected while the March NOPA soybean oil stocks came in marginally lower than expected.

NOPA reported its members crushed 170 million bushels of soybeans in March, slightly above average market expectations of 168 million bushels. Pre-report estimates were at 155 million to 171.4 million bushels. March NOPA crush was slightly below last year's same-month crush of 171.9 million bushels though.

November soybeans broke through support what was the March 29 low of $9.18. The Nov. 26 low of $9.1075 and then the psychological $9 mark is support after that. The contract low of $8.6475 set in mid-July is major support. Resistance is the nine-month high of $9.71 that was set Dec. 12.


For the week ending April 18, May canola futures were down $7.40 at $449.10 Canadian per metric ton. The May Canadian dollar was down 0.00315 at 0.74735. This brings the U.S. price to $15.22 per hundredweight.

• Velva, N.D., $15.49 per hundredweight, May at $15.60.

• Enderlin, N.D., $15.83 per hundredweight, May at $15.83.

• Hallock, Minn., $14.97 per hundredweight, May at $15.37.

• Fargo, N.D., no bid.


Cash feed barley bids in Minneapolis were at $3, while malting barley received no quote. Berthold, N.D., bid is $2.50 and CHS Southwest New Salem, N.D., bid is at $2.55.


Cash bids for milling quality durum are $4.50 in Berthold and at $4.40 in Dickinson, N.D.


Cash sunflower bids in Fargo were at $17.50, with May bids at $17.55.

For the week ending April 18, soybean oil was down 14 cents at $28.80 on the May contract.

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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.