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Wheat market stalls

04/09/2012 @ 11:08am

Last week, most wheat markets retreated from their sharp run-up from the stocks and plantings reports. Weather has regained center stage, but crop condition ratings Monday afternoon and the supply/demand report Tuesday morning will be as important. 

Minneapolis had been the leader higher, but chart formations look a bit ominous after Thursday’s action with a minor spike suggesting some stalling ahead. Recent moisture across parts of the northern Plains has dampened the bullishness – for now.

Kansas City has also run into some notable selling as rains across even the driest regions of hard red winter wheat country have the crop looking way better than last year. Crop progress is as much as three weeks ahead of normal; if we can get through April without killing frost, then we’re likely looking at a boomer crop from the southern and central Plains.

Chicago wheat has seen steady support from the frost fears along with stronger corn prices. Feed demand continues to be its strongest fundamental component, and that likely won’t change until September when the first new crop corn makes its way into the pipeline. Here too, getting through April without killing frost will suggest big yields are on the way.

Weather across the Northern Hemisphere certainly has a mixed feel to it. Europe still has very dry soils in the key northern growing areas, but rains are forecast to alleviate some of that shortage for now. This weekend rains saw widespread and soaking rains across southern Europe into the Black Sea region, giving that area a much needed boost to soil moisture. 

China is always a guess, but rains have been scarce across the North China Plain where most of their winter wheat is grown. With 90% being irrigated, that’s not such a big deal except that their irrigating rivers have also seen much less than normal rainfall at their headwaters. They pulled a rabbit out of a hat last year thanks to massive irrigation and cloud seeding; let’s see if they can do it again this year.

Export sales were strong for wheat, corn and beans, with all three beating the high end of expectations. China continues to take US corn, and over the weekend bought Ukraine corn and feed wheat.

Technically, wheat’s rally to the trading range high has clearly offered yet another round of resistance. Minneapolis managed to jab the high and take out some stops, but the spike high/poor close is inviting the bears to take a bite. In the short term, I expect Kansas City and Chicago will regain some of their losses to Minneapolis – at least until we get past the cold weather threats (two to three weeks). Barring any freeze damage, however, longer term I continue to think that Minneapolis will lead the wheat complex higher.

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