Minneapolis takes the lead
Wheat markets had a strong week, this time led by Minneapolis as the weather market moved into the northern plains, with hot and dry conditions continuing to stress spring wheat in the US and Canada.
After the disastrous hard red winter wheat crop this year, the trade has been counting on a big spring wheat crop to stretch winter wheat supplies. But, with spring wheat crop conditions declining, the trade is understandably very nervous about yield prospects and another supply scare.
Weather is not expected to offer much relief in the near term, with hot and dry forecasts still prevailing for the northern plains and Canada. Reports of crops already burning up in eastern Montana potentially set the tone for more to come as the heat moves east.
The acreage report on Friday offered little bullish news for wheat, but was positive for corn and beans, and with wheat already in a positive mode, it was easy to follow the row crops higher. So far, the weather has been generally good for corn and beans, but as get into July days, any weather scare will set the market sharply higher, and wheat will surely follow along.
With harvest pressure all but behind us for hard red winter wheat, and harvest trying to get into full swing for soft red winter in the Midwest, I would expect to see the spreads between KC and Chicago continue to widen. Rain delays might cause some short term concerns for soft red, but in the bigger picture, supplies are plentiful for soft red and very tight for hard red, and those fundamentals alone should continue to be the driving force in both markets.
In other world news, India finalized their 2.2 MMT purchase with 800 TMT coming from Canada, and the rest split between the EU, Russia and Argentina. We're still waiting to hear the results from the Iraqi tender for 750 TMT, with Australia bowing out of this round.
Technically, this week's action has proven very positive for price action. Minneapolis already has seen new contract highs and looks poised for even higher levels. KC should be able to at least test its contract high before seeing any significant setback, and Chicago will tag along, but will likely have difficulty getting back to its contract highs in the near term.
Look for support in KC Sep at the gap from 4.95- 4.93, then the swing low of 4.83. Look for resistance at the swing high of 5.24, and then the contract high of 5.28. In Chicago Sep, look for support at the trough of 3.964, and then the swing low and old gap at 3.87. Resistance should show at the breakout of 4.03, and then the gap from 4.094- 4.13.
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