Midwest Weather Turning Drier

(AGweek) –  Wheat The wheat markets went different directions this week with Minneapolis contracts experiencing heavy buying on dry conditions, and Chicago/Kansas City contracts softening up as harvest begins. The Minneapolis premium has widened another 25 cents to $1.54 premium over Chicago and Kansas City pointing to a continued need for higher protein wheat in 2017-18.

The first spring wheat condition ratings of 2017 showed a 17 percent decline from the same time a year ago. Conditions for the six major producing states were at 62 percent good to excellent compared to 79 percent last year. South Dakota showed the lowest wheat condition ratings since 1988. The latest U.S. drought monitor shows abnormally dry conditions and moderate drought for the heart of the U.S. spring wheat production area in the Dakotas, eastern Montana and northern Minnesota. We may have a perfect storm brewing based on this weather pattern.

Early Texas yield reports show average to above-average yields for winter wheat harvest. We would agree with this as Progressive Ag’s winter wheat yield model increased for the second week in a row by .15 bushels per acre to 50.04 compared to 48.8 bushel trend. The emerging issue is that protein levels are poor. Samples collected near Abilene were in the low to mid 10 percent range and others sampled near San Angelo were below 11 percent. Based on these reports, we highly doubt that the Minneapolis premium to Chicago or Kansas City will fall below the $1.20 to $1.30 range. The market is getting the scenario it does not want — more bushels with less protein.

Corn

Corn received some friendly news early in the week with the release of the year’s first national crop condition ratings. Corn condition ratings were 65 percent good to excellent with trade anticipating 68 percent. Poor to very poor ratings were 7 percent compared to 4 percent this time last year. But the trade seemed focused on planting and emergence scores which were average. Corn emergence is at 73 percent nationally versus the five-year average of 75 percent planted and 75 percent emerged last year. As of May 30, corn plantings are at 91 percent nationally versus the five-year average of 93 percent planted and 93 percent planted last year.

The poorer ratings were enough to show some short covering. Commodity Futures Trading Commission data showed non commercials reducing the heavy net short by 27,406 contracts to -176,503. This is an unusually large short position for this time of the year. Corn has been stuck in a 20-cent trading range since the middle of March, with the high of the range for July at $3.795 and the low of $3.61. Besides a small breakout for around a month that peaked at $3.94 in the middle of February, corn has been trading in this same 20-cent since October. For the week ending June 1, July corn was down 3.25 cents at $3.705 and December corn was down 3.25 cents at $3.8925.

Even adverse forecasts might not be enough to get this market moving in the right direction until unfavorable weather actually shows that it will affect yields. Traders have not been concerned this spring with the wet weather that farmers have experienced in the eastern Midwest and Central Plains states. In the past month, around 40 percent of the Midwest has gotten twice the amount of their normal rainfall. Heavy rains have fallen from Arkansas to Ohio.

Weekly ethanol production was good at 1.02 million barrels per day. This was up 0.99 percent versus last week and up 6.25 percent versus last year. Stocks as of May 26 were 22.763 million barrels. This is up 0.35 percent versus last week and up 9.6 percent versus last year. Corn used in last week’s production is estimated at 107.1 million bushels. Cumulative corn used for ethanol production for this crop year is 4.1 billion bushels. Corn needs to average 97.752 million bushels per week to meet USDA’s estimate of 5.45 billion bushels.

Soybeans

Soybeans continued their sell-off as moisture this weekend was less than forecast trading and improving weather conditions in the eastern Midwest should have improved planting progress. New crop soybeans continue to feel pressure as thoughts of larger acres is the talk of the trade. Now that we are in June, it is a time that many farmers start thinking about switching their corn acres they don’t have in to soybeans. November soybeans lost around 50 cents the last week and a half on the weather sell off. For the week ending June 1, July soybeans were down 14.25 cents and November 2017 soybeans were down 11.5 cents.

Most of the Midwest stayed dry ahead of the weekend. The six-10 day forecast has switched drier for Iowa, Illinois and Indiana, but the eight-14 day forecast still shows cool wet weather continuing for most of the Corn Belt and the Midwest. The Dakotas and Minnesota are forecast to be cooler and drier than normal

On May 30, soybean plantings were at 67 percent nationally versus the five-year average of 68 percent planted and 71 percent planted last year. Average estimates for that week were at 64 to 68 percent. Soybean emergence was at 37 percent nationally versus the five-year average of 40 percent planted and 42 percent emerged last year.

Demand is still a positive factor for U.S. soybeans, but Brazil is not doing prices any favors as they still have much of their record crop yet to sell. The Brazilian Ag Ministry estimates that soybean acres in the 2017-18 growing season could rise 2-3 percent after record production this year.

Canola

For the week ending June 1, canola July futures in Winnipeg were down $17.60 Canadian to $494.60 Canadian per metric ton. The Canadian dollar traded down to 0.7402. This brings the U.S. price to $16.61 per hundredweight.

• Velva, N.D., $16.76 per hundredweight for June through July

• Enderlin, N.D., $17.43 for June through July

• Hallock, Minn., $17.03 for June and $17.10 for July

• Fargo, N.D., $17.45 for June $17.30 for July

Canada canola contracts were sharply lower as fund liquidation weighed on prices for seven straight days. A lack of commercial buying interest contributed to the losses, as end user demand usually slows this time of year

Tightening old crop supplies and persistent seeding delays in parts of Western Canada remained supportive and may give this market underlying support.

Barley

Cash feed barley bids in Minneapolis were at $2.05, while malting barley received no quote. Berthold bid is $2 and the CHS Southwest bid is at $2.40 in New Salem, N.D.

Barley plantings are at 94 percent nationally versus the five-year average of 93 percent planted and 97 percent planted last year.

Barley conditions are at 70 percent good/excellent versus 77 percent last year.

Durum

Cash bids for milling quality durum are $5.50 in Berthold and at $5.40 in Dickinson.

Sunflower

Cash sunflower bids in Fargo were at $15 for May and $15.10 for June.

For the week ending June 1, soybean oil was 33 cents lower at $31.27 on the July contract.