Even with much needed rains missing the every-dry regions of the western central and southern Plains, the wheat market buckled last week, and is getting much more selling pressure to start off this week. The continuous drum-beating of a potential record world wheat crop has just been too much for this well worn bull market. India reporting that they expect to procure enough wheat from their farmers and not have to import wheat also was a disappointment for the bulls.
Today's plantings report showed total wheat plantings slightly higher than analysts' estimates at 63.8 million acres, which had a negative slant to it. But the quarterly stocks report was a surprise as well with wheat stocks at 710 million bushels, above even the highest trade estimate. Stocks aren't quite as tight at they seem? An upward adjustment coming for ending stocks coming from USDA?
It's hard to say, but with the downward momentum already in place before this report, the negative numbers didn't give the bulls any fuel. And again, even with a large region of key growing areas under severe stress, this market is struggling to maintain even minor rallies - if you can call $1.20 a minor rally. I still have to stretch my mind sometimes to put things in perspective with these massive price levels.
Nevertheless, I think we can still expect a great deal of price volatility as we move through the growing season. I also continue to think that our long term highs are in place for wheat, and quite possibly for the soy complex as well. For wheat, if we get a weather scare, it will be an opportunity to get some sales on the books. For soybeans, however, a weather scare will hold much more bullish ramifications, so the jury is still out on that one. Corn still has bullish fundamental base, but can it stand alone if wheat and beans are breaking - likely not.
Plantings estimates for soybeans were much higher than trade estimates at 74.8 million acres, and corn lower than estimates at 86.0. Soybeans will likely continue to gain acres as the rains delay corn plantings in the south. Durum acres were 140,000 acres above the average estimate at 2.63 million and, and other spring wheat acres were 186,000 higher than the average estimate at 14.333 million acres.
Spring wheat could be a much different fundamental story, however, than winter wheat. Even with the projected increase in acres, most of the spring wheat region is severely dry, making it difficult to project a big spring wheat crop and/or burdensome supplies. But can spring wheat stand on its own if winter wheat stocks are surging and prices are dropping -likely not.
For me, the bottom line is that unless you get a major weather issue in a major producing region of the world, then wheat prices are very likely headed much lower. While the US western Plains' weather problems are certainly nothing to toss aside, they are not enough to pull prices higher, especially when the rest of the hard winter wheat of the plains is in very good shape. And while some of the soft red wheat may be under water, those potential losses are not enough to offset the significant increase in soft red plantings last fall.