Wheat market surges higher-Louise Gartner
Weather continues to be the driver of the wheat complex. With the widespread drought in the southern plains, rains/floods in the northern plains, European drought and signs the Chinese drought is intensifying, wheat has plenty of reasons to be bullish.
Planting delays across most of the spring wheat region have become serious, and Minneapolis futures are enjoying a rare leadership role as both old and new crop significantly outperform the Kansas City and Chicago markets. Minneapolis front month reached a 3-year high while KC and Chicago only reached a 2-week high.
The harvest has begun in the southern plains though few seem to have noticed, particularly the market. The expected small harvest is unlikely to pressure the market until it reaches the northern Kansas region, which is still at least a few weeks away.
Basis values are also surging for both spring wheat and corn, as farmer selling has all but stopped and available supplies tighten. Users are looking at late harvests for both crops and stepping up to secure supplies that will last them through late summer.
Northern Europe continued to be dry with more yield reductions appearing imminent. There are some light rains forecast for the region over the next two weeks, which softened European prices slightly late in the week, but only after prices had reached contract highs first.
US prices started the week under some pressure on heavy fund selling, but finished the week strong even as we headed into a 3-day weekend. Most of the late strength was focused on old crop July futures for both wheat and corn, with deferred months lagging.
It looks like Russia will be opening their export markets soon, with the announcement expected any day. It appears to be just a matter of either being July 1 or August 1. They did imply, however, that their wheat exports would only be about 4.5 MMT, far below USDA’s recent estimate of 10 MT. While the re-entry of the Black Sea region into the world export market is generally a bearish development, the lower than expected amount they’ll have for export helps to offset some of that price pressure.
Ukraine is on track for a big grain harvest, with current production estimates at 43-47 MMT, above last year’s drought reduced 39.2 MMT. Wheat production is expected to be 21.5 MMT, up from last year’s 16.8 MMT. They are expected to export around 8 MMT of wheat, about equal to USDA’s estimate. The increase in exports from the Black Sea region will help to offset world production losses but they are unlikely to be enough to cover all of the losses.