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Bull market over?

Agriculture.com Staff 03/30/2009 @ 3:28pm

Wheat markets started the week managing to briefly put in a new high for the rally. But the bullish momentum quickly faded and prices began to falter and then really buckle when the forecasts confirmed good moisture headed for the dry pockets of the central plains.

And, indeed, the moisture was plentiful even though much of it was blowing snow. That snow, however, provided a much needed blanket of insulation as temps reached into single digits across some regions of the plains. It does not look like any notable damage was done to the wheat crop and this moisture should at least help the crop get off to a good start in the key state of Kansas.

In North Dakota, far too much moisture has rivers flooding and residents sandbagging. Fieldwork will clearly be delayed and many crop watchers are already factoring in at least 500,000 acres of spring wheat will not be planted, and that number could easily increase. Unfortunately, given the large carryover of old crop stocks here in the US and in Canada, it's unlikely that lower spring wheat acres alone will be enough to pull the market higher, particularly considering that once the crop get planted, it obviously will have plenty of moisture available to it.

After the sharp sell-off midweek, prices found support at the early March lows. Markets will likely be quiet until the plantings and stocks report, which will be released Tuesday morning. The trade expects total wheat plantings to be 58.6 million acres compared to 63.1 last year. Winter wheat is projected to be 42.1 million acres, spring wheat at 13.6 and durum at 2.6. Wheat stocks as of March 1 are projected to be 1.06 billion bushels, compared to last year's .71 billion. These acreage numbers are certainly subject to change, and likely will, considering the ongoing abandonment of Texas winter wheat and the expected losses of spring wheat acres.

The trade expects soybean planted acres to be 79.6 million acres compared to last year's 75.7; corn planted acres are expected to be 84.4 million, compared to last year's 86.0 million acres. The row crops' price action following the report could easily have an influence on wheat’s price action as well, so all grain markets are awaiting these important reports before making major direction commitments.

Russia announced this past week that they will liquidate government grain stocks onto the export market to make room for the new crop. Makes one wonder what they would call what they've been doing… It's not like they been absent from the market, and now they're going to really get aggressive? We've known that their government stocks silos have been full, as are China's. If both of those countries have another big wheat crop, the world will certainly feel the price pressure. India has talked for weeks about exporting some of last year's crop to make room for their new crop, with harvest just about to begin. It's unlikely they'll be able to accomplish that goal, considering the huge subsidy they would have to pay to compete on the world market.

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