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Wheat Can’t Hold Gains
The grain complex started the week higher, led by corn and soybeans with gaps. But those gaps quickly faded, and Monday ended with outside days lower for wheat and corn. Bullish traders continue to suggest corn planted acres won’t be near USDA’s recent estimate, but price action struggles to maintain upward momentum.
For the week, Chicago wheat lost $.21, KW lost $.27 and Minn was down $.14. Corn lost $.24 with soybeans down $.12. Wheat prices this summer/fall are highly dependent on corn prices with so much moving to the feed channel, so when corn pulled lower wheat quickly followed.
Harvest is moving from the central U.S. to the northern Plains. The southern and central Plains had great yields, with records seen in many regions. Test weights were excellent, but protein ran low. Fortunately, there is a market for the low-pro as feedlots have embraced adding wheat to rations.
The market is gearing up for large winter and spring wheat crops from the northern Plains as well. After a wet spring and some planting delays, weather since then has been nearly ideal for much of the region, and crops are looking great.
The rest of the Northern Hemisphere countries are working through their wheat harvests as well. Yields are running about as expected with good quality. France reported their wheat harvest at 33% completed. Russia is moving along in the Southern Region with wheat beginning to fill the export pipeline.
However, Russian FOB offers were about $2.50/MT higher than last week. Even so, they captured the lone cargo of wheat Egypt bought this week, beating out the EU, Ukraine and Romania after losing to them in the previous two weeks of sales.
While Russia has slowly increased FOB offers to around $201/MT, we see they slightly lowered feed wheat offers to $190/MT. Perhaps they are finding more low quality than expected in their harvest?
U.S. export sales last week were 347 TMT, within the range of estimates but still not an impressive number, particularly considering USDA raised export estimates in the supply/demand report last week by 50 million bushels. We’ll have to have better sales than last week to keep up with projections.
As wheat markets deal with harvest pressure and the expected intense export competition, it still remains that corn will have a major price influence on wheat. Corn’s planted acreage number is a huge unknown and is likely to offer more price volatility over the next few weeks, especially as we head into the August 12 supply/demand report. Weather continues to be a major player in corn price action as well, with intense heat over the Midwest this weekend expected to be followed by much cooler temps and perhaps some drying over the next few weeks.
Wheat fundamentals by themselves are not bullish, and I expect we’ll settle into a trading range through the marketing year. With large world production of both wheat and corn, upside is limited for both markets. That said, corn prices could still take another run higher if acres/weather throw a surprise, and wheat would then likely test the recent highs and could well stretch to new highs. That kind of wheat rally would likely be short-lived and would probably happen by the end of August.
Owner, Spectrum Commodities
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