You are here

Bull market over?

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.

Russia, China and India have raised the support price for wheat over the last few years, and no surprise, production has increased. Also no surprise, much of that production is making its way into government stocks as producers opt to sell there instead of to the cheaper open market. Now those governments are struggling with burdensome stocks and low prices. Does any of this sound familiar? Heck, we could have told them that would happen; we wrote that chapter in farm program history.

So, where do we go from here? Notwithstanding the problems in Texas and Oklahoma, with the recent moisture across the Plains it looks like most of the central Plains' crop will get off to a good start. The drought story is gone at least for now. There is a lot of growing season ahead of us, but at this point there are very few trouble spots. Most of the rest of the Northern Hemisphere is sitting in a good moisture situation as those crops break dormancy. So, at this point we can't point to any one thing and make a bullish argument any more. Big carryover stocks and intense export competition will keep pressure on world prices unless the new crop gets into trouble.

I think we have to get back into the bearish mindset and now look at this market from that perspective. Weather scares likely will be short lived and should be viewed as selling opportunities. Technical resistance at this point is just below last week's high of 6.33 basis KC Dec futures.

This publication is strictly the opinion of its writer and is intended solely for informative purposes. It is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is obtained from sources believed to be reliable, but is in no way guaranteed. Futures and options trading always involve risk of loss.

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.

Read more about

Crop Talk

Most Recent Poll

To what extent do you feel your farm’s data is safe from hackers?