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Little reaction to wheat freeze
More cold weather descended on southern Plains’ winter wheat; in fact, record-cold temps for this time of year were recorded in the southern Texas panhandle through southwest Kansas this week. While most crop watchers acknowledge that there was definitely damage done to the crop with these four freeze events of the last month, actual production loss estimates are still sketchy at best.
Anecdotal reports suggest huge losses as insurance adjusters release whole farms, and producers from Texas to Kansas and Colorado ratchet up loss estimates.
While the cold weather has hurt some of the crop, it has also delayed progress and thus actually likely saved some of the crop. This is particularly true in the northern Kansas through Nebraska region, where wheat growth was notably behind normal due to the cooler-than-normal spring.
Kansas City futures did see a strong day on Thursday in response to the weather but fell back on Friday as the market geared up for the crop tour that starts on Monday and First Notice Day on Tuesday.
Considering the wide range of crop maturity and the relentless freezes, I think it’s safe to say that the tour’s task of estimating this year’s hard red winter wheat crop in the Plains will be extremely difficult.
The market certainly hasn’t responded to the freezing temps like I thought it would.
Apparently the lack of trouble in soft red or soft white and the impending huge corn plantings are too much of a drag on hard red.
Spring wheat traders are starting to feel a little nervous as well, with planting delays getting serious across much of the northern Plains. Warmer weather is on the way, but North Dakota, Minnesota, and Canadian producers will have to deal with floods first.
Export sales were sluggish, with more interest in new crop than old crop. China showed up again for a cargo of new crop, which brings them close to 1 MMT bought over the last few weeks. The stories emerged again this week about China’s poor wheat storage facilities and deteriorating stocks, which only makes one wonder how this supposedly happened so suddenly.
Perhaps it hasn’t been so sudden at all. We’ve heard these ‘deteriorating quality’ stories off and on for years, but they usually get snuffed out quickly by their government-controlled media. This time, the stories keep popping up, which leads me to think the problem is serious. I still find it interesting that they want delivery of imported wheat during their own harvest when domestic supplies would be at their greatest.
Technically, the charts showed only slight progress for Kansas City and Minneapolis, but Chicago was stuck, much like it has been for three weeks. Minneapolis and Kansas City didn’t hold well on Friday, giving up much of their gains. The bull spreads continued to work, however, and both gained against Chicago. So we do see the quality factor becoming more important.
Seasonally, we tend to see highs for winter wheat in early May, which is just around the corner. However, given the broad uncertainty of this crop, and if indeed it’s as bad as producers are saying, then this could be a year when wheat actually rallies into its harvest-time seasonal low window of mid-June. I would think that the scenario of a rally into June is more likely than a low.
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