Trading after the wheat tour
It was an active week in the grain complex. Wheat had the Kansas tour going on and yet another freeze, corn had Mother Nature wreaking more havoc with cold, rain, and snow while soybeans had cancellations and then big new-crop sales.
The wheat tour poured over Kansas with the goal of quantifying this year’s production, but slow crop development and multiple freezes made that job very difficult. While acknowledging that the formulas they had to use would likely make their estimates too high, they nevertheless reported what they saw.
Total Kansas production was projected at 313 million bushels on a 41.1 bpa. Average production estimates of the last several years is 341 million. They assumed an 18% abandonment rate, the highest since 1996. Western and southwestern Kansas looked the worst, no surprise, and the estimated yields would be achieved only if the rains came. The western Plains still are extremely dry.
In central Kansas, however, the crops looked much better, and trade sentiment seems to be that the good yields there will largely offset western losses.
However, another record-cold morning on Friday brought freezing temps through much of central Kansas down deep into the Texas panhandle. The wheat that hadn’t already been killed certainly was set back again. The general sentiment now is that we'll have to wait until harvest to really know the extent of the damage.
Oklahoma estimated their wheat production at 86 million bushels, down 46% from last year. Colorado put out an estimate of 34 bpa and Nebraska is estimating 30 bpa, down 27% from last year.
Informa released an updated winter wheat estimate on Friday, taking hard red down 52 million bushels from their previous estimate, now standing at 798 million bushels. Soft red was lowered just 1 to 508 million and white wheat left unchanged at 222 million bushels.
And of course, here in the U.S., spring plantings are at a record slow pace, and a slow moving rain/snow system this week and weekend will keep that pace subdued for the next several days. The market is beginning to factor in lower acres for corn and spring wheat, likely along with some pulse crops. Soybeans could be the beneficiary with more acres, but we could see producers just opt to take prevent plant and call it good.
With hard red winter wheat production down notably this year, it makes a good spring wheat crop more important. Late plantings in spring wheat make that prospect much more difficult.
Canada released its grain stocks as of March 31 with most major crops at multiyear lows. All wheat was estimated to 13.459 MMT, the lowest in five years and compared to 14.652 last year. Canola stocks were 3.91 MMT, the lowest in eight years and compared to 5.2 last year. Barley was 2.96 MMT, a record low and compared to 3.28 last year.
Ukraine has begun to lower grain production estimates as warm and dry weather persists across the eastern half of the country, stressing winter wheat and delaying corn and barley plantings. Early production estimates were in the 22 MMT range, with USDA currently projecting 22.6 MMT. Now those estimates have been lowered to 19 to 20 MMT by the Ukraine government. It’s still higher than last year’s 15.7 MMT.
Their dryness is part of a larger dry pocket that stretches across southern Russia and into western Kazakhstan. The Lower Volga River Valley region has been under severe drought since 2010, and forecasts suggest that it will continue dry for the near-term.
Wheat prices did manage a stronger performance last week, but even so, it could be easily described as a disappointment to the bulls. Corn seems to have more influence than frost, and if Midwest farmers can get into the fields, corn will likely pull back. Corn prices did manage to test the major gap resistance this week, and clearly have struggled to maintain the upward momentum. They will likely pull lower and wheat will feel that pressure as well.
However, longer term, I look for wheat to find solid support on pullbacks as production prospects continue to ratchet lower in the U.S. and likely the Black Sea. Long-range weather forecasts are beginning to suggest a hot summer in the northern Plains, which could spell trouble for spring wheat.
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