More pressure in wheat market
Despite some positive news coming into the wheat complex, prices resumed their slide this week after a week of trying to find some stability. Front month futures have fallen well below major supports on relentless selling on any rally.
Part of the pressure came from rain and snowfall over some of the central Plains, badly needed even if it did come late in the season. There also appears to be a great deal of cash selling across all of the major grains and oilseeds, much of it related to end-of-year tax positioning. If that is indeed the case, then after January 1, we’ll likely see a sharp drop in selling. I guess we’ll know soon.
We did get some encouraging news with the U.S. finally competing in the key Egyptian market, selling 180 TMT of soft red winter, and another 110 TMT of hard red winter through a private sale. Some believed the private sale was to replace an Argentine purchase that has likely been cancelled. Argentina’s government this week announced that wheat harvest was 58% completed, up from 42% last week. They also announced a definitive restriction of any further wheat sales, taking total exports down from 6 MMT to 4.5 MMT, the same amount that has already been committed. They continue to shave production estimates as well, now down to 10.2 MMT, which is still higher than industry estimates that hover at the 9.8 MMT level. Argentina is also mulling restricting corn exports. It’s been a tough year for their wheat production, and now it appears corn could see a sharp drop as well on slow plantings and reduced acreage.
Export sales jumped last week to 671 TMT, up significantly from what we’ve been seeing as U.S. prices quickly have dropped to the cheapest in the world. Prospects look good for U.S. exports as we get further into the marketing year as supplies of other major exporters are expected to drop sharply.
This week, extremely cold weather descended on Russia where large regions had no snow cover to protect already stressed winter wheat. Crop analysts seemed pretty confident that there was at least some damage done, but obviously we won’t know until spring. The area of most concern was the Lower Volga River Valley where wheat was planted into very dry conditions and not well established. They say the dryland wheat might be OK because of low water content in the plants, but that irrigated wheat could have been hurt the worst.