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Rain Forces Wheat Market Retreat
Rains are on the way for the central and southern Plains. So far, they’ve been mostly light and scattered, but longer range forecasts suggest that the rains will be more widespread as we head into mid-April. Despite crop conditions continuing to decline, wheat markets finally relented into the longest correction since the rally began in late January.
The levels of technical support are varied, with each wheat market having notably different price levels that could prove to be viable. Front month Chicago May tested its first support on Friday, and actually bounced off of that level. The July contract still had 12 cents to go from Friday’s low, and by the close was 23 cents from that support.
Kansas City, on the other hand, had rallied much more than Chicago or Minneapolis and had further to fall before testing supports. And even though it has been the leader on the downside, those supports are still well below the market. The first notable support for KC July would be the 7.08 level, with more major support at 6.86.
Minneapolis has a mixture of concerns with too much old crop in the countryside and fears of planting delays across a large swath of the northern Plains. The first layer of support on both old and new crop was also tested on Friday, and the market bounced off that level into the close. The next major support level is about 55 cents further down from Friday’s close.
If the rains materialize as forecasters appear to be coming into more agreement upon, it is likely that wheat will see more pressure in the near-term. These rains will not be enough to alleviate the dryness or make the crop, but they are at least enough to give a very thirsty crop a drink during a critical time. Temps are forecast to be below average in the eight- to 14-day outlook, but there doesn’t appear to be a freeze threat.
Crop reports on Monday delivered the stocks and plantings numbers, with the plantings estimates quickly challenged by the trade as being too low when all the acres were added up. Nevertheless, these are the numbers most will be working with until the next planting report in June.
USDA reported that total wheat plantings would be 55.8 million acres, 400,000 less than the average trade estimate. All winter wheat at 42.0 million was up 100,000 from January’s estimate, with most of it coming from hard red winter. USDA added 500,000 acres to the Kansas plantings from their January report, bring them more in line with recent years' wheat acreage. They lowered Texas plantings by 300,000 acres.
Spring wheat plantings are estimated to be 12.0 million, up 400,000 from last year, a 4% increase. Durum was pegged at 1.8 million acres, which was up 330,000 from last year, a 22% increase.
Corn plantings were projected to be 91.7 million acres, 1 million less than the average trade guess and down from last year’s 95.4 million. Soybean acres were projected at a record 81.5 million, 430,000 higher than the average estimate and up from last year’s 76.5 million. The day following the report, Informa released its own plantings estimates, taking wheat up to 56.1 million, corn up to 92.2 million, and soybeans to 82.4 million.
Grain stocks were generally close to expectations with corn stocks as of March 1 at 7.006 billion bushels, 93 million less than the average trade guess and up 30% from last year. Wheat stocks were 1.055 billion bushels, down 175 million from last year, a 14% drop. Soybeans stocks were 992 million bushels, almost exactly equal to one year ago.
From a technical perspective, it is worth noting that the first level of supports in Chicago and Minneapolis have held. However, I would expect the near-term outlook for prices to be lower unless the rains fail to come.
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