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Choppy wheat trading

Wheat gapped lower on Monday following the lead of corn, which looks to have an open window for planting next week. Wheat then managed to stabilize for a few days, finding a strong rally on Thursday only to give it all back on Friday.

USDA’s crop report came in about as expected, and with corn under pressure on the improved planting prospects, wheat just couldn’t find enough support to hold its gains. The U.S. dollar surging higher also added pressure to the entire grain complex.

A look at the crop report showed old-crop end stocks for wheat were left unchanged at 731 million bushels. Corn stocks were increased just 2 to 759 million bushels, and soybeans left unchanged at 125 million bushels.

 

Wheat production was projected to be 2.057 billion bushels, down 212 million from last year. All winter wheat was estimated to be 1.486 billion bushels, down 159 million from last year. Hard red winter wheat was estimated to be 768 million, down 236 million from last year; soft red at 501 was up 81 over last year, and white winter at 217 million was down 5. New-crop end stocks were pegged at 670 million down 61 million from last year.

Corn production was estimated to be 14.14 billion, up 3.36 billion over last year; new-crop end stocks were pegged at 2.004 billion bushels, up 1.245 billion from last year. Soybean production was estimated at 3.39 billion, up 375 million over last year; new-crop ending stocks were estimated at 265 million, up 140 million from last year.

World wheat production for 2013/14 was increased by 46 MMT to 701 MMT, and end stocks were estimated at 186 MMT, up 6 from 2012/13. USDA kept Black Sea production high despite the increasing weather problems being reported from there. Russian and Ukrainian wheat production was projected to rebound after last year’s poor season with Russia producing 56 MMT (up 28 from last year) and Ukraine producing 22 MMT (up 6 from last year). Those numbers will likely be the highest we see this year.

While the report was basically neutral, the markets were already under pressure before its release from improving weather and a strong dollar, and prices continued to flounder throughout the day.

Weather improved across the southern Plains this week with milder temperatures and good rains in the far western and central regions, but the southwest Plains still remain very dry. Hot temps are forecast to arrive next week across the entire prairies’ region from Texas all the way up to Montana. It looks like weather extremes are continuing as this volatile spring transitions to summer.

Corn planting delays are starting to make some people nervous as we head into mid-May with much of the central Midwest still very wet. The trade has already begun lowering corn acreage estimates but not necessarily raising soybean plantings. Producers may just opt to take prevent plant insurance and be done. Also, with the late development of the soft red winter wheat, acreage expectations for double-crop soybeans are also being lowered since wheat harvest will likely be late, not allowing enough time for a soybean crop.

 

Technically, wheat just continues to chop around as it seems to find more influence from corn than its own fundamentals. Early May is often a seasonal high, but this year is anything but typical. I continue to think that wheat will find better support as the market gets closer to harvest, and we get a better assessment of hard red production. 

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