Weather, demand support wheat
Wheat managed to dust itself off following the negative stocks report while corn and soybeans continued to flounder. Weather and demand pulled wheat higher with reports of freeze damage dominating early-week trade and talk of large Chinese purchases supported prices late in the week.
The fund roll has also begun, and the large short position held by many hedge funds is helping to support the front month as they cover shorts and re-position into mostly the new crop months. Corn is seeing the opposite, with selling in old crop and buying in new, if they wanted to remain long at all. The May wheat/corn spread moved from a small discount just a week ago to more than a 70-cent premium by Friday.
Weather has many on pins and needles as they try to assess freeze damage from last week and not seeing the widespread rains that were forecast and sorely needed across the plains. Now the weather forecasts are calling for more freeze conditions in the central plains mid-week that could do additional damage.
Informa put out an estimate of winter wheat production this week, factoring in their freeze damage assessment. They estimate that hard red winter production will be 903 million bushels, down 101 million from last year, a 10% drop - some due to lower yields but also with plantings down 3%. They project that soft red, on the other hand, will be up 86 million at 506 million bushels, a 20% increase over last year with plantings up 19%. Total winter wheat is estimated by them at 1.631 billion bushels, down just 14 million from last year.
Meanwhile, it’s going to heat up in Texas and Oklahoma, with very little rain forecast. Obviously, the extremely low subsoil moisture throughout the entire Great Plains makes timely rains critical, and so far Mother Nature has been stingy in the western regions.
US weather isn’t the only problem. European conditions are far too wet in the main wheat growing regions of the UK and northern Germany and France. UK plantings are down 25% alone, and early spring growth is showing definite signs of winter stress.
The Ukraine issued a report forecasting that spring plantings would be delayed by about 2 weeks, and production would likely be down about 1.5% as a result. Russia is starting to green up and soon we’ll see how their wheat fared through the winter after a shaky start last fall. The southern regions of both Ukraine and Russia are forecast to be dry this spring, which only adds to Russia’s already dry status of the last three years.