Louise Gartner Contract highs fail
Wheat had another volatile week last week. We faltered early in the week after a big run the previous week on expectations that crop condition ratings would be generally steady and not show much more frost damage, and indeed that came to fruition. However, just as quickly, the market shot back up on fears of weather problems in the EU, Russia and Ukraine.
Chicago and Minneapolis managed to jab into new contract highs, but Kansas City couldn't get that kind of performance. The KC/Chicago spreads spent most of the week weakening further, with KC new crop trading as much as -21 to Chicago. The likelihood of hard red wheat recovering from the frost better than soft red has kept the KC price action much more subdued than Chicago's, which also has more influence from corn than KC.
Developing dry weather in the EU has elevated concerns of further world production declines and supply shortfalls. While it's still early in the growing season, rains across much of the European continent have been well below normal for the month of April. Forecasts do not call for any soaking rains, so that situation definitely warrants monitoring. Russia, Ukraine and China are all on the watch list as rains have been notably less than normal with little on the way.
Australia did get some good, soaking rains in the eastern regions-greatly needed as they begin plantings. Subsoil moisture is pretty much zero, so they, again, also warrant monitoring. Stats Canada also weighed in last week with their seedings report suggesting that producers would plant 10% less wheat than last year, at 23.8 million acres.
India has issued a tender for 1 MMT, and has stated they'll import 3 MMT (so far). Even with a bumper crop for them, their government is having difficulty procuring stocks from the local farmers. Thus, they are looking to the world market to rebuild government supplies.
The Kansas crop tour starts on Tuesday. There are numerous opinions on crop conditions already out there, with crop analysts already having surveyed as much as they can for frost damage. This will be another snapshot in time, and this year will be difficult to get a good assessment because of the varying degrees of damage to the crop.
We continue to hear reports of further damage, particular in the western region of KS, where it was thought that they'd been spared much lasting damage. Recent reports are showing that weakened wheat stems are unable to support the plant and/or carry the nutrients. It's looking like we'll continue to see conditions decline as time goes on.
Deliveries were heavy for Chicago wheat this morning and zero for Kansas City wheat-pretty indicative of the underlying fundamentals. But, that doesn't explain the discount that KC has to Chicago; I would expect that those spreads would come back to their normal relationship with KC carrying a premium to Chicago.
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.