Wheat on the ropes
The selling pressure continued this week as traders looked at minimal frost damage and calculated that we’ll just have more feed wheat available after all is said and done. This comes on top of what looks to be a very large and low protein hard red winter wheat crop coming out of the southern plains. Just what we need - more feed wheat.
That said, rains across much of the northern plains put the hammer to spring wheat this week as well. So, despite the probable need for high protein to blend for blending, Minneapolis wheat couldn’t find support this week either.
Chicago and Kansas City wheat contracts fell to new trading range lows. Chicago managed to bounce back into its range, but Kansas City couldn’t get that kind of interest and only managed a test of the breakout.
Crop condition ratings continue to look stellar for hard red. Even with some points shaved off of soft red, overall ratings for that type are still way above normal as well.
Unless the weather turns negative for the southern and central plains, it looks like Kansas City futures will continue to push lower. Chicago and Minneapolis could still argue that they should hold their trading range lows, particularly with the reports of soft red winter wheat fields being torn up. But for now, the lack of threatening weather and much needed rains in Europe are increasing the negative atmosphere of the wheat complex.
European crops are off to a difficult start, with more production estimates being lowered out of France and Germany and some surrounding countries as well. Recent light rains will help alleviate the dryness for the time being, but they will certainly need timely rains after a dry fall and winter. France projects that their farmers will have to replant about 1.5 million acres, mostly to barley and corn.
Corn did manage to get a nice pop off of its swing lows following news of more China purchases and a report from Japan that they were suspending imports of European corn due to quality issues. While that would likely lead to more US corn exports to Japan, they will also increase their wheat feeding with most of it coming from Australia.
Technically, the charts look increasingly bearish. The inability for prices to follow through higher following the stocks and plantings report, and now the negative reaction to the frost leaves wheat charts grasping for a lifeline.
As mentioned earlier, Kansas City is already breaking down, and fundamentals justify that. As for Chicago, the jury is still out. We still haven’t fully assessed the frost implications, not only from a yield loss perspective, but reports of fields being torn up are worth noting. Minneapolis has no friends at the moment; rain makes grain. The dry northern plains got a drink, not a big one, but a drink nonetheless and spring wheat futures took a hit.