Weather dominates wheat market
The weather forecaster was busy this week in the wheat complex. Cold temps in soft red country, heat in hard red winter country, and rains in the northern Plains. There was something for everyone.
It looks like the cold Friday morning in the eastern Midwest did little damage, if any. Temps are expected to be cold again Sunday and Monday mornings, but the latest forecasts have lowered the frost potential.
Winter wheat markets had plenty of choppy price action early in the week with a strong finish on Friday on the heels of a big jump in corn prices. Minneapolis continued to get pummeled on an improving planting season and spread liquidation.
In the southern plains, heat is the issue. The Texas panhandle and southwest Oklahoma are getting the worst of the heat, which is expected to move north into Kansas next week. So far, moisture has been abundant for most regions with the crop advancing much ahead of normal. While yields could suffer in those hot areas, the overall production out of the central and southern Plains is expected to be huge. The crop tour will be this coming week, just in time for the heat.
Corn shot higher on Friday, after it spent much of the week in choppy price action. Big sales to China pushed corn sharply higher, and wheat was certainly a beneficiary. Corn continues to hold gain in value against the wheat markets, and for the first time in history Kansas City wheat prices traded below corn prices.
Wheat also got a boost on Friday on chatter about dry conditions emerging in southern Russia and Kazakhstan. Ironically, northern Russia needs some warm temps, but the southern region has trended on the dry side so far this spring. This is where their major drought started two years ago, so it’s understandable why the market would get spooked about another spell of below normal precip. That region will be watched very closely.
On the flip side, most of the dry European areas received good soaking rains this past week, and are in much better shape than the start of spring. Germany is still trending dry, but the stress on European crops in general is much reduced. That said, Europe still is assessing the harsh winter damage, with more acreage expected to be replanted.
The International Grains Council reduced world wheat production estimates for the 2012 season by 5 MMT to 676 MMT, down 3% from last year’s 695 MMT. The growing season is early, but odds are very high that world stocks will decline this year.