Wheat prices find good support
Plenty of news to digest this week, with USDA's crop report offering some bearishness and Mother Nature offering increasing strength for the bulls. Even the technicals are looking much more interesting these days as they appear to be offering another argument for the bull camp.
The crop report wasn't expected to show significant changes to the stats - either here or for world numbers. But, it certainly did. We saw a reduction in US exports of 20 million bushels, even as some were expecting an increase. USDA is acknowledging the impact of the Black Sea's aggressive pace of sales so far and their huge discount to US prices. Considering the size of the Black Sea's crop in 2008, it is likely that they will be aggressive exporters throughout the marketing year.
USDA also lowered food use by 25 million bushels, reflecting the drop in consumption as the world slips into recession. Imports were raised 10 and seed usage down 2 to take total ending stocks up 57 million to 712 million bushels and stocks/use to 32.2%, both the highest in 7 years.
As if that wasn't bearish enough, world production was increased by 1.6 MMT to 684 MMT, mostly from Australia's increase of 1.35 MMT. World ending stocks were raised by a very large 5.9 MMT to 155 MMT, with a variety of countries contributing to that total. Russia saw their exports increased again by 1 MMT, with the Ukraine up .5 MMT. The Black Sea is now projected to export 31.8 MMT, up over 3 MMT in just 3 months, and compares to the US at 26.7 MMT.
This is only the second time in recent history that they've had higher exports than the US, with the other time in the '02/03 crop year when the US had a huge production shortfall. This year, with both countries having good crops, they're still outpacing us. It speaks volumes about how the Black Sea has emerged on the world scene not only as a large producer, but also a competent and consistent exporter over the last 8 years. With their buildup in productivity, storage capacity, transportation and export facilities, it is clear that their presence is here to stay.
Aside from the crop report, the market is actually watching the weather much more closely than old crop statistics. The persistent drought in Texas has caused serious stress to most of their crop, with reports of some acres already being abandoned. The dry region is expanding north into the Panhandles and into western KS/eastern CO, where moisture needs are increasing as well. Meteorologists say this is the driest start to the spring in history for the central Plains, and few would argue that statement. While some moisture is in the forecast, the amounts are minor and it is not expected to fall over the driest areas.
Elsewhere in the Northern Hemisphere, most wheat areas are in good shape. Even China has received good moisture to start their season, quieting the alarms they were sounding about their winter drought. Europe and the Black Sea region are just breaking dormancy and snowfall had been plentiful throughout their cold season so very little winter kill is expected. Acreage is lower, as we all know, and worldwide production is expected to be down from last yearâ€™s record crop, but still larger than normal.