Wheat life after the Report
Leave it to a crop report to create an attitude change in the grain complex. Friday’s plantings and stocks report abruptly changed the direction of price action coming into the reports. In particular, wheat and corn had been on the ropes as we headed into Friday’s reports, but the bullish numbers had traders quickly re-establishing the longs they’d given up earlier in the week.
A quick look at the numbers: Total wheat plantings at 55.9 million acres were 1.5 million less than trade estimates. Spring wheat was the biggest surprise at only 11.976 million, 1.34 less than estimated. North Dakota seemed to hold the most uncertainty coming into the report, with many suggesting that producers would opt for corn rather than wheat – and they were right. ND will plant 150,000 less acres of spring wheat while doubling their durum acres to 1.5 million. Many of those added durum acres are simply what couldn’t get planted last year due to flooding.
Corn plantings at 95.9 million were 1.1 million more than expected. North Dakota will increase plantings by 52% to 3.4 million. We will see record corn acres in Iowa, North and South Dakota, Minnesota and Idaho. Corn is certainly king.
Soybean plantings were 1.4 million less than expected at 73.9 million. All of the major producing states will see a drop except for Illinois, which is projected to increase plantings by 1%.
The stocks report was also bullish for all grains. Wheat stocks at 1.2 billion bushels were 22 million less than expected. Soybean stocks 15 million less than expected at 1.372 billion; and corn stocks were 6.009 billion, 150 million less than expected.
The fundamentals of wheat appear to be increasingly bullish. World wheat production this year is highly likely to be down from last year, at least in the major exporting nations. Winter kill, and now dryness, issues in Europe have already taken a toll on the very young crop there. We already know that Ukraine is a bust, with many of those normal wheat acres going to corn.
Russia doesn’t have much of a story yet as their wheat is still trying to break dormancy. They did report some winter-kill issues in their southern region. China is off to a good start, largely due to good conditions last fall. However, we’ve been watching dryness issues there as well, but so far they are looking fine.
Here in the US, the southern plains winter wheat is also off to a great start, but 2-3 weeks early makes it very vulnerable. The forecasts do call for two cold fronts to move through the plains in the early part of April. Until we get at least into the middle of April, the threat of frost will be an issue.