Wheat gets buried by corn
The wheat market got tortured last week from a combination of its own set of very weak fundamentals and a USDA acreage report that sent corn reeling. Over the last few weeks, what little support wheat could find was coming from corn, and when the rug was pulled from corn wheat had nowhere else to go than into the cellar with corn.
The prospective plantings report gave us a huge acreage increase for corn, up 12.127 million acres to 90.454 million, the largest corn plantings since 1944. Most of those acres came from soybeans, which lost 8.382 million, and spring wheat which lost 1.091 million acres.
The wheat acreage breakdown has other spring wheat at 13.808 million, and durum at 1.99 million, actually up 120,000. Winter wheat was adjusted upward slightly from their January estimate with most of the increase coming from hard red winter. Kansas' seedings were up another 500,000 at 10.3 million. Soft red was slightly lower, most coming from Ohio, as the high corn prices came in time for producers to switch some planting intentions.
The increase in winter wheat acreage, coupled with excellent growing conditions and the meltdown in corn has the wheat market on the ropes. Despite the projection of increased wheat feeding and continued tight world stocks, there is little to stop the negative bias that's been firmly implanted in the wheat complex. Rain makes grain and wheat country has had plenty of rain.
Having said that, however, the kind of shellout we've seen in wheat on Friday and Monday have flushed this market pretty clean, at least in the short term. Monday's action showed that there is certainly some interest in owning wheat at these levels, which took us back to last summer's lows. The spike formation could suggest a temporary bottom, and considering that the corn growing season has not even begun in the Midwest yet, there is plenty of opportunity for corn to offer some price action to the upside, which would still support wheat.
And looking at the bigger picture in corn, it would seem to me that we are absorbing the most negative news that this market will see; it's hard to imagine USDA increasing corn plantings, and the likelihood of obtaining trendline yields, with about 4 million acres coming from marginal land, is slim.
Short term, I look for wheat to find willing buyers at these price levels, and weâ€™ll likely see a jump in export business for both old and new crop. Longer term, weather related scares (in wheat or corn) should still be used as selling opportunities.
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