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IKAR in Mass and Industry Media
Grains trending off lows; China talks dragging on
The wheat market was supported by lower condition ratings, a weakening U.S. dollar and a U.S.-Brazil trade agreement this week.
Kansas crop ratings declined 2 percent to 49 percent good to excellent, and Oklahoma improved 4 percent to 60 percent good to excellent from the week prior. Texas improved 5 percent to 33 percent good to excellent after experiencing an 8 percent decline the week prior. Southeast states in the soft red belt show ratings below the five-year average as they continue to struggle with high moisture.
The U.S. dollar continues a short-term trend lower to the $95.40 level which is helping the wheat complex. On the charts, $95.40 is a support level. The Fed announced they will be unlikely to increase interest rates through the end of 2019. This should help limit strength in the U.S. dollar.
The U.S. and Brazil agreed to an export quota of 750,000 metric tons of duty-free U.S. wheat in exchange for reduced tariffs on Brazilian pork coming into the U.S. The next day, Brazil's farm minister clarified that the 750,000 metric tons of duty-free wheat would be imported from any world country and not specifically the U.S. Argentina wheat farmers are protesting the move, as there is a treaty agreement with Brazil, Argentina, Paraguay and Uruguay known as the Mercosur agreement. They are concerned that any duty-free exemption is coming out of a country not in this trade bloc. Brazil imported 86 percent, or 5.9 million metric tons, of its total wheat from Argentina last year, with most of the other 900,000 metric tons coming from the United States. A private firm estimates Brazil wheat production up 1 million metric tons from last year at 6.6 million metric tons and Brazil wheat imports falling 1.3 million metric tons to 5.7 million metric tons.
U.S. exports continue to disappoint. Weekly export inspections totaled 13 million bushels, which was below trade expectations. Inspections now total 660.5 million bushels, down 6 percent from a year ago and below the U.S. Department of Agriculture's estimate of a 7 percent increase. Weekly export sales were 298,600 metric tons (11 million bushels), which were also at the low end of trade expectations. Total commitments are up 3 percent from a year ago. IKAR stated that Russian wheat prices declined 1.3 percent last week after recent increases.
May Minneapolis is developing an inverse to deferred months and acting in a similar fashion to when March was developing an inverse late this winter. The basis really didn't move much all winter for spring wheat. We didn't see the typical improvement around Christmastime.
One could make a case that Minneapolis basis will improve in the April-May-June time frame before new crop supplies come online. However, the futures market could simply do the job by bidding higher on the front month as it did with the March contract a few months ago to attract bushels.
May Minneapolis shows short-term support in the $5.54, with short-term resistance at $5.75. For the week ending March 21, May contracts for Minneapolis wheat were up 16.5 cents at $5.7125, up 13.75 cents at $4.665 for Chicago wheat, and up 4 cents at $4.47 for Kansas City wheat.
The corn market is trying to find a little lift as flooding in the Central Plains is starting to put a bug in the trade's ear of a late planting season. It is too early to get excited about extended delayed planting for the main corn producing areas, but the weather so far has been cold and wet.
South American corn production looks to be in good shape with Brazil and Argentinian corn both off to a fast start.
This week's action is basically the story of how the market traded most of the winter — in a narrow 13-cent range. It feels like the market is carving out a similar range, only less the carry: July from $3.87 to $4 previously, now $3.72 to $3.85. It feels like the market will likely stay in this range until we get the acreage report March 29.
FC Stone estimates corn acreage at 90.4 million compared to 89.1 million last year. This increase of 1.3 million would be more in line with our thoughts versus a number of 3 million to 6 million acre private estimates previously. With the Federal Crop Insurance deadline last Friday, we noticed a number of clients increasing prevent plant coverage. This tells us that regardless if the March plantings intention number is 90 million or 93 million, it is likely that number will be the highest of the year and will only decline from that point.
Crude oil continues to slowly climb and has broken the $60 threshold for the first time since mid-November, which is more positive news for this corn market. A Reuters article quoted Saudi Arabia's oil minister that they and other OPEC countries will remain committed to their recent supply cuts. Another article stated that Russia may ramp up production this summer. The overall recent increases in gasoline prices do make the argument for higher ethanol and corn prices. Ethanol futures have spiked higher since putting in a March 11 low and consolidated this week. President Donald Trump met with Brazil's president Jair Bolsonaro this past week and rumors are speculating greater U.S. ethanol exports to Brazil.
Commodity Futures Trading Commission data as of March 12 shows the funds with a record net short in corn of 258,000 contracts, selling 81,000 contracts on the week. Look for the possibility of these funds to begin short covering before next Friday's USDA survey release due to the possibility of fewer than expected corn acres.
There was not much movement in soybean futures as they continued to trade in a tight range this week.
May soybeans continue to search for a direction as they trade near the $9 mark. South America weather has been generally fair this past month and has alleviated concerns for their later crops. Soybean meal has seen a small recovery this past week since getting pressured by the Asian swine flu epidemic in the South Pacific.
Flooding in the Central Plains and Missouri River Valley are making headlines in the news but is not getting the market excited. The Mississippi Delta is making progress with field work ahead of the weekend before more rains are expected to fall and may start causing delays. The 16-to-30-day forecast is wet for the Delta and western Midwest.
It was announced that the top U.S. trade negotiators will travel to China the week of March 25 for another round of trade talks with Chinese Premier Liu He. There seem to be conflicting rumors coming out about how talks are coming along. Trump has recently said that tariffs on Chinese imports could stay in place indefinitely until Beijing complies with a trade deal. Trump told reporters, "We're not talking about removing (tariffs), we're talking about leaving them for a substantial period of time, because we have to make sure that if we do the deal with China that China lives by the deal." Trump also stressed that "we're getting along with China very well." Both presidents have said in the past that they are getting along very well during these negotiations and are yet to come to an agreement, so take these comments with a grain of salt. The only news that matters is that they are still talking.
The weekly Brazil crop roundup puts Brazil's soy crop at 115.5 million metric tons versus Conab's 113.5 million metric tons and the USDA's 116.5 million metric tons expectation. Private consultant Safras expects Brazil's 2019 soybean exports to come in at 70 million metric tons in 2019 versus 83.86 million metric tons in 2018.
Weekly export inspections totaled 30.9 million bushels for the week ending March 14, up from 18.4 million bushels a year ago. Inspections from 2018-19 total 1.0174 billion bushels, down 31 percent from the previous year. Total commitments of 1.525 billion bushels in 2018-19 are down 17 percent from a year ago.
The technical soybean chart continues to look like a clutter but technically has been in a small uptrend since the middle of July with short bursts of 40 cents up-and-down movements in between. May soybean futures have bounced off their fresh recent lows of $8.8775 and the psychological $9 mark is the first support. The contract low of $8.53 set in mid-September is now major support. Resistance is $9.345 which was the high Feb. 25.
For the week ending March 21, May canola futures were up $2.60 at $467.40 Canadian per metric ton. The April Canadian dollar was down 0.0016 at 0.7482. This brings the U.S. price to $15.86 per hundredweight.
? Velva, N.D., $15.84 per hundredweight, April at $15.84.
? Enderlin, N.D., $16.69 per hundredweight, April at $16.69.
? Hallock, Minn., $16.05 per hundredweight, April at $16.05.
? Fargo, N.D., $16.90 per hundredweight, April at $16.75.
Cash feed barley bids in Minneapolis were at $2.60, while malting barley received no quote. Berthold, N.D., bid is $2.50 and CHS Southwest New Salem, N.D., bid is $2.55.
Cash bids for milling quality durum are $4.50 in Berthold and at $4.70 in Dickinson, N.D.
Cash sunflower bids in Fargo were at $17.45. April bids were at $17.60.
For the week ending March 21, soybean oil was down 33 cents at $29.10 on the May contract.
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