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Minn. leads wheat market-Louise Gartner

The announcement over the weekend that Russia would be lifting their export ban as of July 1 caused a round of selling in the wheat complex, taking price lower for the first two days of the week. However, the critical situation with spring wheat planting pushed Minneapolis wheat to reassert its leadership role. 

The forthcoming lifting of the Russian export ban is not without some confusion. Domestic prices in Russia quickly shot higher as exporters aggressively bought wheat to get into loading position. The government is concerned that higher wheat prices will contribute to already high inflation, and appears ready to impose a form of export restrictions scaled to domestic prices. For now, there haven’t been any announcements on restrictions, but the trade widely expects them to come. 

In the meantime, the battle has already started between Russia and Ukraine with very aggressive offers from both for a small piece of business to Lebanon. Ukraine got the contract, but it looks like both are willing to be extremely generous in their offers.

Here in the US, our attention has been widely focused on the planting challenges for spring crops. Private estimates are suggesting a significant drop in corn and spring wheat plantings. The eastern Midwest should have made good progress this past week with warm and dry conditions, but spring wheat plantings likely progressed very little.

The northern plains are a vast lake, and producers appear to be ready to throw in the towel. Crop insurance adjusters are very busy and the situation has not improved this week. As of last Sunday, spring wheat plantings were only 55% in North Dakota, and 59% in Montana, normally 93% and 95% respectively. It’s hard to believe that only about half of the crop would get planted in those two key producing states, but that is a very real possibility. 

It’s also hard to imagine where prices could go if that is the case. Only three years ago, front month Minneapolis futures soared to $25/bu on tight supplies. High protein basis led the way. The odds are very high that this year’s production will be even less than 2008, with high protein supplies at least as tight. That said, spring wheat has a seasonal tendency to peak in early June. 

It’s a tough call; the fundamentals look extremely bullish and could well propel Minneapolis sharply higher as exporters and end users scramble for remaining old crop supplies, particularly of hi-pro’s, which would be led by basis. I suggest giving the market another week or two to see what it can do, but at some point it will have factored in the acreage losses and then stall out. While it may take several weeks to know just what total spring wheat acreage is, it just seems prudent to take advantage of this rally while it’s here - at least with any remaining old crop.  

Exports were on the light side this past week, which was mostly expected. We could also expect that we’ll see stiff competition from the Black Sea for the next few weeks as well. It is interesting to note that while both Ukraine and Russia are beating each other up to get sales, both countries have seen the weather conditions turn slightly stressful for their crops. It wasn’t until the month of July last year when their droughts really took hold, so this production season is far from over for them and if conditions get worse, the brakes could get placed on exports very quickly.

China is about 23% done with their winter wheat harvest. Even though drought conditions have prevailed throughout their entire growing season, they still project a bumper crop. I’m sure US southern plains’ farmers would like to know how that works. 

This publication is strictly the opinion of its writer and is intended solely for informative purposes. It is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named.  Information is obtained from sources believed to be reliable, but is in no way guaranteed.  Futures and options trading always involve risk of loss. Past performance is not indicative of future results.

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