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New wheat highs with choppy prices – Louise Gartner

Last week, wheat saw plenty
of price action but only managed slightly higher gains for the week. An early
week burst higher put prices into new highs for the move in Chicago and new
contract highs for Kansas City and Minneapolis, but the rest of the week saw a
choppy, sideways action that deflated much of the early strength. 

Australia again dominated
the news for most of the week as more rains caused severe flooding and
increased damage to the ripe wheat. Talk of abandonment in some regions led to
projections of losing up to 2 MMT in those wet areas. So, even while production
estimates were being increased by Australia, USDA and others, there were
already estimates being put forward of production losses.

Informa released their latest
estimates of Australian production last week with a 26 MMT projection, up .8
from last month and up 18% from last year’s 22 MMT crop. Australia’s ABARE is
projecting 26.8 MMT, which would be a record and exports at 16.0 MMT, compared
to last year’s 14.8 MMT. In USDA’s supply/demand report issued on Friday, they
increased Australia’s production by 1.5 MMT to 25.5 MMT, but lowered exports
1.0 MMT to 15.0.

Needless to say, it is a
huge disappointment for Australian producers who watched a potential record
setting crop get washed away by rains and floods. If there’s any comfort to be
had, at least there is a market for the lower quality wheat, and the Southeast
Asian buyers are already booking shipments for their feed manufacturing
industry.

USDA’s supply/demand report
contained a few surprises for corn and wheat as they raised US ending stocks
for both. While the changes were minor, it took the market by surprise as they’d
been expecting a decrease for both. They left feed wheat usage unchanged but
decreased food usage by 10 million bushels, which was directly reflected in a
10 million increase in ending stocks to 858 million bushels.

Corn saw a 5 million bushel
increase in ending stocks to 832 million after imports were raised by a like
amount. Ethanol and feed usage were left unchanged at 4.8 billion bushels
despite a record setting pace of production so far this year and expectations
that we’d see at least a slight increase. Corn’s ending stocks are now still
the smallest in 15 years and half of just a year ago.

Soybean exports were raised
for the fourth month in a row, up by 20 million bushels to1.59 billion, which
then lowered ending stocks by 20 million to 165 million, still 5 million higher
than trade expectations.

World wheat production was
raised 3.6 MMT and ending stocks increased 4.2 MMT after increases for
Australia, Canada and the FSU were factored in. World production for corn and
soybeans were increased slightly with ending stocks for corn up .8 MMT and
soybeans down 1.3 MMT.

Egypt bought more wheat this
week, and surprised the trade by taking it all from France and Argentina,
snubbing the US and cancelling the hard red winter wheat tender. The rising
wheat price here quickly made others more competitive.

Technically, the market is
holding very well after running to new highs. While it may be due for a
correction, the upward momentum remains strong and the fundamentals are still
supportive. With the weaker dollar and funds enamored with agricultural
commodities, it looks like the easy path is still higher at least for the short
term.

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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