Grains Pressured Ahead of March 31 USDA Report

(AG Week) – Wheat Trade reacted to short term forecasts calling for rain over much of the dry portions of Kansas. This sent Kansas City contracts 25 lower, Chicago 15 lower and Minneapolis six lower for the week. The Commodity Weather Group put out its monthly forecast. Currently CWG models are showing a weak El Niño occurring this summer. The Delta and the Northern Plains will be wetter than normal. The southeastern and southern U.S., as well as the northern third of Canadian growing regions, will be drier than normal, according to their forecast.

Private analysts in China are estimating an increase of 500,000 metric tons of wheat imports over and above the U.S. Department of Agriculture’s 4 million metric tons estimate. Internal Chinese wheat prices are currently over $450 per metric ton or double international rates. This disparity has Chinese mills cutting production and favors imports from North America and Australia.

Corn

Corn prices continue to trickle downward a couple cents a day as buyers are reluctant to stick their necks out with record-ending stocks and a good looking crop so far in South America. Lack of spec buying interest is holding corn prices near recent lows and weekly support. The news that could get these markets going is the March 31 planting intentions report. The trade expects less corn acres than last year, but the real market mover will be how many less acres. An early spring could keep corn acres larger than analyst estimates because as most farmers know, corn is still king in the Midwest. For the week ending Thursday, May corn was down 10.5 cents and December corn was 9.75 cents lower.

The U.S. dollar index has broken back below 100 points for the first time since early February, but is still not propping up grain prices. With a stronger Brazilian Real and recent weakness in the U.S. Dollar, U.S. corn remains competitive. Free On Board corn prices are still quite a bit cheaper in the U.S. Gulf than in Brazil ports, which should help keep U.S. exports steady. There are not many issues with South America’s corn crop, and this will limit corn upside until we shift our attention to the USDA planting intentions report.

March 24’s Commodity Futures Trading Commission data showed an unexpectedly large shift by managed funds as non-commercials switched to a net short position for the first time since the week of January 17. This was the fourth largest week of selling on record and was not anticipated by the trade. As of March 14, non-commercials were now net short 24,000 contracts, down from net long positions of 80,000 contracts the previous week.

Corn weekly export inspections were 52.5 million bushels for the week ending March 16. This is above 39.9 million bushels for the same week a year ago. Inspections for 2016-17 totaled 1.191 billion bushels, up 72 percent from the previous year and well above USDA’s projected 17 percent demand increase.

Ethanol production continues to be a positive when corn needs as much fundamental help as it can get. Ethanol production for the week ending March 17 averaged 1.044 million barrels per day. This is down 0.10 percent versus last week and up 4.92 percent versus last year. Total ethanol production for the week was 7.308 million barrels. Stocks as of March 17 were 22.595 million barrels. This is down 0.75 percent versus last week and up 0.34 percent versus last year.

Soybeans

May soybeans dipped below the support levels that were the recent lows of $9.92 and haven’t looked back. The fundamentals are not giving new buyers any bullish news to jump into the market. Even though the record South American soybean production has been a well-known detail for a while, sellers are still using this as leverage to drag this market lower. They are also expecting a huge increase in U.S. soybean acres in the planting intentions report. For the week ending March 23, May soybeans are down 9 cents and November soybeans are 7 cents lower.

The fund longs have been shrinking their positions for the last six weeks. Friday’s CFTC data showed non-commercials are still bullish but slowly cutting back on positions. As of March 7, non-commercials were net long 98,000 contracts, down from 128,000 the previous week. Managed Funds have been gradually cutting back on their long positions after reaching a high of 176,000 contracts the week of January 24.

The recent strength in the Real has supported U.S. exports when typically our exports completely fall off. U.S. Free On Board Gulf prices are still competitive to Brazilian port prices, which is not typical for this time of year. With Brazil’s record soybean harvest two-thirds complete and farmer selling slow, storage is starting to become an issue and is forcing farmers to increase sales.

The weekly Brazil crop roundup puts the soybean crops at 108-109 million metric tons versus USDA’s 108 million metric tons forecast. Weekly Argentina crop roundup pegs their soybean crop the same as USDA’s estimate of 55.5 million metric tons. Earlier in the week, Safras reported Brazil’s soybean harvest at over 63 percent versus 56 percent average.

The USDA ag attaché in China said in their annual report that they expect no increase in U.S. soybean exports to China in the 2017-18 marketing year. They do expect soybean demand to increase in China this coming year, but not at the pace they have been experiencing lately. The small growth in demand is expected to get filled by South America’s record crop.

Canola

For the week ending March 23, Canola May futures in Winnipeg were down $15.40 Canadian to $488.30 Canadian per metric ton. The Canadian dollar traded down .0003 at 0.7498. This brings the U.S. price to $16.61 per hundredweight.

Cash bids in Velva, N.D., were $15.97 per hundredweight for March and $15.91 for April/May. Enderlin, N.D., bids were $17.10 for March and $17.10 for April/May. Hallock, Minn., bids were $16.61 for March and $16.78 for April. Fargo, N.D., bids were $17.30 for March and April.

Barley

Cash feed barley bids in Minneapolis were at $2.05, while malting barley received no quote. Berthold, N.D., bid is $2 and CHS Southwest bid is at $2.25 in New Salem, N.D.

Durum

Cash bids for milling quality durum are $6.25 in Berthold and at $6.25 in Dickinson, N.D.

Sunflower

Cash sunflower bids in Fargo were at $15 for March and April. For the week ending March 23, soybean oil was 85 cents higher at $33.13 on the May contract.