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Wheat Shows Promise for 2019

We’re close to wrapping up the year, and despite the government shutdown delaying/cancelling important data reports, the wheat market continues to see active trade, particularly in the intermarket spreads between the three wheat markets.

For the week, Chicago was down 3, Kansas City down 7, and Minneapolis down 11. Minneapolis showed a brief bounce against the winter wheats on Thursday but gave it back on Friday. With quality issues increasing, my guess is that Minneapolis will ultimately lead the market higher into the spring.

Quality concerns are increasing in both Argentina and Brazil as rain batters wheat still standing in the fields. Domestic prices are rising in both countries as supplies of milling grade wheat are expected to fall significantly. Brazil normally buys much of Argentina’s surplus, and this year it looks as though they may be buying a higher percentage of Argentina’s excess milling supplies.

We don’t know how much wheat the U.S. sold last week, with the government shutdown delaying key reports. We do know that Gulf FOB values are competitive and that Black Sea prices are increasing. We also know that cold weather in the Black Sea likely is slowing grain transportation and that the Russian government was taking the slow road to approving phyto-sanitary export certificates.

All this would lead one to think that more business would be flowing to the U.S., but without daily reports of large sales, or the weekly reports of all sales, we can’t be certain.

The January 11 reports are also at risk. A slew of numbers are expected then with the supply/demand report, quarterly stocks, and winter wheat plantings. These important reports often set the tone of the market through the winter, so price action will struggle without the data.

Fundamentally, we’re still looking at generally tight supplies of wheat available to the export market, in particular of high-grade milling wheat. The market is expecting that winter wheat plantings will be steady/lower than last year as rains stalled seeding from the southern Plains to the northern prairies.

The trade war between the U.S. and China has hints every now and then of progress, but there are still huge differences to be ironed out and time is ticking away. Soybean producers are staring into the abyss as Brazil’s early harvest has begun and some are still calling for a record crop. China has booked a small amount of U.S. soybeans, but not nearly as much as hoped. Meanwhile, they are also in talks with Russia to grow soybeans for them. While that is a market that would take time to develop, it clearly is not a positive development for U.S. producers.

For the wheat guys, the outlook for the winter is encouraging as competition is expected to decrease and we hold plentiful high-quality stocks.

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