Wheat market to remain volatile
There are few other ways to describe the wheat market than volatile. The fundamentals so far this crop year have been decidedly bearish, with corn being the only thing that offered support. But then after the plantings report, corn began its meltdown and drug wheat along with it. Now, Mother Nature is having her say.
Excellent growing conditions have sped the crop along far ahead of schedule, with 46% of the wheat in KS already jointed by last week, compared to 19% normally, and expectations were that over 55% would be jointed by the end of this week. That's all fine unless you get a late frost, which is what Mother Nature delivered over the long Easter weekend.
Record freezing temps were recorded well south of the Texas panhandle and throughout most of Oklahoma and all of Kansas. The temps were low enough long enough to do significant damage to much of the hard red winter wheat in the southern and central Plains. There was also heavy frost in the Delta region and Southeast US, where soft red winter wheat is grown. There appears to be a high chance of damage there as well.
The corn crop was not spared, either. It looks like many areas of the Delta and Southeast also were cold enough to cause either burn back or kill it completely. And weather continues to play a role in the Midwest where cold and wet weather have delayed field work; with forecasts showing those conditions to continue for at least another two weeks.
In the central and southern Plains, there are reports of wheat lodging and stems splitting. There is no doubt that significant damage was done this past weekend, but it will take at least a few days to assess the damage. For wheat that survived, there is plenty of moisture to support recovery if the temps warm up soon.
US wheat producers were looking at a bumper crop of winter wheat, but not after this weekend. US corn producers were looking at massive acres that would produce adequate supplies for ethanol and feed use, and that is looking less likely as well. And it's looking likely that more soybeans will get planted than was estimated just a week ago.
I'm writing this after the market close on Monday, in which we saw prices open sharply higher in reaction to the frost event with near limit up gains in wheat and double-digit gains for corn. However, prices couldn't hold their gains and slowly slipped throughout the session, ending the day with negative numbers in some of the wheat and corn contracts.
It's not a very impressive finish to a market that could have seen a major setback in production; but there are no shortage of traders who believe that frost scares are only that- scares, and need to be sold. This kind of damage takes time to assess, and often can't be quantified until the combines are finally in the field.
Technically, today's price action looks very bearish with a spike high in wheat and corn, and an outside day lower in beans and products. Today's high will now become the first major resistance for any bullish advance; but the formation alone gives ammunition to the bears.