You are here
Global Output Weighs on Wheat Market
Wheat continues its slide this week, after finishing the month of May significantly lower than where it started. While the hard red winter wheat crop continued to get pummeled early in the month, rains arrived over the last week that at least stabilized the crop, and possibly improved prospects in the northern central Plains.
Harvest would normally be in full swing across Texas by now, but those rains are delaying progress. The market isn’t expecting much production from Texas or Oklahoma and the combines will likely move quickly through those states.
All eyes will be on Kansas where late freeze damage is still being assessed. The market clearly expects that the eastern wheat regions will again offset the losses from the west, much like last year.
While the U.S. has seen a notable setback in hard winter wheat production, soft wheat yield estimates continue to ratchet higher. The Illinois Wheat Association reported from its wheat tour that yields could reach 64.6 bu/acre, compared to last year’s 61.6 bu/acre.
Russia’s weather service is forecasting hot and dry conditions for early summer, adding to mounting concerns about the crop following a relatively dry spring in much of the Volga River Valley region along with parts of the Southern Russia region. Nevertheless, so far Russia is still projecting a big grain crop with wheat production estimates up 1 to 3 MMT over last year at 53 to 55 MMT. All grain exports are projected up 3 MMT to 25 MMT.
Ukraine is also increasing its grain production estimates, as weather has improved significantly since the early spring. All grain is estimated at 60 to 62 MMT, with some saying that last year’s record 63 MMT could be exceeded. Wheat production is estimated at 22.5 to 23.5 MMT, up from last year’s 21.8 MMT. All grain exports are estimated at 30 to 32 MMT, almost equal to last year’s 32 MMT.
Europe is on pace for a large wheat crop as well, with weather much improved from the dry start over much of the continent. All wheat production is estimated at 139 MMT compared to last year’s 136 MMT.
China has begun its harvest, and early estimates are suggesting that this could be another record year of wheat production.
While the Northern Hemisphere moves into the final stage of wheat production, the Southern Hemisphere is gearing up for another season. Planting has begun in both Argentina and Australia. Argentina is estimating that about 6% of its winter wheat is planted, compared to the average of 9%. They project total plantings to be up slightly at 4.3 million hectares.
Australia is well into its planting season and so far has had good moisture. They are bracing for the widely expected El Niño to develop, which normally brings dry conditions for much of the country. So the recent moisture is very welcome and will at least help get the crop off to a good start.
Technically, the trend has turned lower again and price action has followed the seasonal fairly well, despite fundamentals that I thought would have carried the market better. Harvest lows usually come anywhere from mid-June to mid-July for winter wheat, usually about the time harvest is in around central Kansas.
Kansas City and Minneapolis futures are hovering near the spring lows while Chicago is well past that support. I would expect the market to stay pressured until we get past the Kansas harvest.
THIS IS A SOLICITATION. Reproduction or rebroadcast of any portion of this information is strictly prohibited without written permission. The information reflected herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. In an effort to combat misleading information, The Linn Group has performed its due diligence to insure that all material information is provided within this report, though specific information related to your investment, hedging or speculative situation may not be included. Opinions expressed are subject to change without notice. This company and its officers, directors, employees and affiliates may take positions for their own accounts in contracts referred to herein. Trading futures involves risk of loss. Past performance is not indicative of future results.