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Wheat prices move lower

Harvest selling kept pressure on wheat prices early in the week, and then a bearish USDA supply/demand report added to the negative tone of the complex. Wheat prices dropped to new lows of this move, testing the April lows in Kansas City and getting close to those lows in Chicago. Minneapolis is holding together very well despite the weakness in the winter wheat markets.

 

USDA actually increased hard red winter wheat production while the trade had expected a decline. They also increased soft red more than trade expectations, and left spring wheat alone despite the major planting delays.

No changes were made to acreage for corn or beans, either, leaving that heavy lifting for the June 28 plantings report. They did lower average corn yields by 1.5 bushel per acre to 156.5, and increased wheat yields by .5
bushel per acre to 44.6; they left soy yields unchanged at 44.5
bushes per acre.

While raising the domestic wheat numbers was a bit of a surprise to some, the lowering of world wheat numbers was also a surprise. Most of the decrease was in the Black Sea region, also a surprise considering the improving weather there. World wheat production and end stocks were decreased by 5 MMT. World carryout is now projected at 181 MT, just 1.4 MMT higher than last year; not exactly indicative of a world awash in wheat.

One could easily take a couple of million tons of U.S. spring wheat out of the production figure and all of a sudden world stocks are declining. Add to that the declining estimates coming out of Europe and USDA’s estimates of Black Sea production still higher than either Russia’s or Ukraine’s own estimates, and those world carryout numbers could get tighter still.

That’s not to say it’s a screaming bull market, just that the long-held bear market attitude might be a bit overzealous. A big corn crop could certainly keep a lid on wheat prices, but extremely tight old-crop corn supplies (even tighter for quality stocks) and the late harvest will keep wheat moving into feed rations for a few months yet. Throw some heat on the corn crop during the late pollination, and suddenly new-crop feed grain supplies aren’t so burdensome.

But for now, we watch as the combines roll into Kansas and expect that harvest pressure will be around for another week or two at least. Typically, we see winter wheat harvest lows come when harvest is about midway through Kansas. Soft red wheat is ready for harvest, but heavy rains and standing water are keeping combines out of the field. Some are suggesting that yields and quality could be suffering.

Exports continue to impress and actually run ahead of schedule, something we haven’t seen for at least a year. China was only a small buyer last week, but Brazil continues to be a large presence particularly in the hard red winter market. Argentina’s short crop is forcing Brazil to our market, looking for high-quality hard winter wheat, and they will likely keep coming until Argentina’s next harvest in November.

 

Technically, the market is struggling to hold the April low support in Kansas City. Thursday’s reversal up didn’t get confirmation on Friday. Minneapolis continues to be the strongest market and will likely remain so as spring wheat acres look to be down notably this year. Soft red prices are nearing those April lows as well, and will likely follow Kansas City and test them before its harvest is over as well. 

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