Gartner: Wheat market gets a bounce
Wheat rallied much of the week on short-covering and renewed weather worries. After a 50-cent sell-off over the last three weeks, wheat finally found buying that lasted more than two days. Some shorts decided to cover before the plantings and stocks report, and others were concerned about warm and dry weather moving back into the plains.
Despite the plentiful rains three weeks ago, the western fringes of the plains have quickly dried out again as high winds have sapped the moisture. The crop in the central plains is getting a good start, but timely rains and good weather are still critical; the month of April can throw lots of curves at the crop and were just getting started.
Crop conditions ratings showed improvements in the plains states, but not as much as expected in Kansas, which lent some of the support to the market. Beginning the first week of April, USDA will issue condition ratings for all states on a weekly basis, and we expect to see more improvements for the central plains' states.
The plantings and stocks report was quite a shocker for the marketplace. Spring wheat, at 13.9 million acres, durum at 1.83 million and corn at 78.02 million acres were much lower than expected, while beans at 76.9 million acres were much higher than expected. Wheat reacted sharply higher, especially in KC and Minn, with Chicago tagging along.
If these acreage numbers are close to correct, then quality hard wheat supplies will remain very tight and price volatility will stay with us for several months. Corn shot higher as well, adding more strength to the wheat complex. The beans chopped around for much of the session until they finally were pressed lower late in the day.
The stocks report was about as expected, with corn and beans showing record large stocks on hand. Wheat stocks were just 12 million bushels less than last year.
Weather is still the key to the wheat complex, with Kansas City still the leader. Chicago wants to go lower, but will still be supported by KC if it does indeed resume the uptrend. It is unlikely that Chicago would be able to take out its double top at contract highs, but the KC market could still make a run to new highs.
This past week saw two gaps higher in KC, taking us near the major gap down from the high. It will be very difficult for KC to get past those gaps above us, but if it does, it opens up the topside very quickly. For now, I expect that we'll see this week's gaps get tested to see what the market can do to the downside. But I also expect that we'll get a better test of the major gap above us in the near term.
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