Rich Nelson: World weather problems
Wheat closed on a high note
for the week, closing 14 1/2 higher on the day and 55 1/4 higher for the week.
The 55 1/4 cent rally was enough to erase last week’s entire sell off. Last
week, going home it looked liked the bears were in control. With today’s close
it looks like the bulls are going home in control of the wheat market. The
market is putting weather premium into the Kansas City, Minneapolis and the
Chicago market but for different reasons. The hard red wheat (KC) is pricing in
production losses due to the severe drought hitting that region of the country.
The spring wheat (MW) is continuing to get too much rain and snow. This is
preventing the planting of this year’s crop. The soft wheat (Chicago) is
pricing in damage due to the flooding rains that have hit the Ohio River valley
in the past few days. There are more heavy rains predicted for this part of the
country over the weekend. The U.S. is not the only part of the world having
weather problems. Canada is dealing with too much moisture and can not get
planted while England, France and Germany are dealing with too dry conditions
for their crop. The weaker U.S. dollar was also being viewed supportive to the
market. The weaker dollar will hopefully help wheat exports. They were a little
anemic this week. The trade was looking for sales to come in between 400,000
and 800,000 tonnes. They came in at a disappointing 303,000 tonnes.
With the weather concerns for the spring and hard wheat areas mounting, the wheat market should be well supported. This will keep us friendly to this market. There could be a head and shoulder bottom forming on all the exchanges’ wheat charts. We will need to take out the April highs to confirm this chart pattern. We look for the market to trade in a sideways to higher range and will be buyers on market dips.
Wheat Cheap Enough?
In previous weeks, we
reported wheat, with a 15% better feed value than corn, was underpriced for
cattle feeding. USDA thinks it will be hog feeders, and to lesser extent
poultry feeders, who switch to wheat from June through August. This chart shows
how wheat stacks up for hog feeding, with its 5% better feed value, for the
eastern cornbelt. It is not yet cheap enough. Next week, we will show how it stacks
up for the southeast US.