Wheat follows corn lower
Wheat was on the defensive much of the week, unable to find support from a bullish crop report or intensifying production problems in the Black Sea and China. Harvest pressure was part of the reason as combines moved into northern Kansas and Nebraska; weakening corn prices and hints of cooler temps in Russia also were credited for keeping prices subdued.
First the positive developments. In Tuesday’s supply/demand report, USDA increased wheat’s exports for 2011/12 by 30 million bushels and lowered ending stocks by 40 million to 728 million. Carry that over to 2012/13 and we saw ending stocks down 41 million to 694 million bushels; not a shortage but certainly not burdensome, either.
World wheat numbers took on a similar look with old crop ending stocks down 1.5 MMT and new crop down 2.4 MMT to 186 MMT, the lowest in 4 years. With worsening weather in China and the Black Sea regions, it is quite possible that world wheat stocks will continue to decline.
Then why couldn’t wheat stage a rally with those bullish numbers? It’s all about corn – which has ultimately led wheat prices for the last two years. USDA left corn statistics unchanged from last month’s estimates while the trade had expected to see a drop in production. Most traders feel that the average corn yield won’t be as high as the 166 bu/acre USDA is projecting, considering the stress already seen to the nation’s corn crop. Those changes will have to come another day.
Despite the negative crop report, corn managed to fend off the bears Wednesday and Thursday as weather forecasts called for more heat and dryness that was sure to continuing stressing the crops. The crop condition ratings took a dive for both corn and soybeans across the heart of the Midwest, but apparently it’s too early for the trade to become fixated on production problems. Projections of record corn production and suggestions by some that corn demand will falter with the sluggish economy cast a nervous pall on those wanting to trade the long side. In addition, weather forecasts changed late in the week and brought in more rains through the dry areas of the Midwest. The corn market rolled back down, taking wheat along with it.
The next major report is just two weeks away with the final plantings estimates and quarterly stocks report. Informa released their estimates on Friday, leaving spring wheat unchanged from their earlier estimate of 13.5 million acres, still much higher than USDA’s estimate of 12.0 million. They also increased corn plantings by 700,000 to 96.8 million acres, higher than USDA’s 95.9. Soybeans are projected by Informa to be 76 million, 200,000 higher than their previous estimate and much higher than USDA’s 73.9 million.