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Wheat Trades Mixed as Corn, Soybeans Break

Wheat markets started the week with follow-through buying from last week’s rally but couldn’t hold the gains except for Minneapolis, which continued to push into fresh 2½–year highs after crop conditions ratings took another hit. For the week, Minneapolis was up 18, but Chicago was down 5 and Kansas City down 9¢.

The market is still primarily focused on available supplies of high protein wheat. The low-pro wheat coming out of the southern Plains is making the situation worse, as exporters are committed to delivering 12%, but this year’s hard red winter wheat in the southern and central Plains is averaging around 11.0%. Yields in the central regions of Kansas appear to be quite good, but the west is generally below average, as expected.

The scramble is on for hi-pro to blend, but new supplies won’t be available for at least a month. Even then, supplies will continue to be tight as the ongoing drought across the northern Plains is taking a serious toll on production. Numerous reports of farmers in North Dakota baling wheat speaks to what is shaping up to be a disaster in the north – following a near disaster in the south.

It’s not just here in the U.S. that production problems are in the making. Europe is burning up, literally. The record heat and dryness is spreading to include Eastern Europe, Ukraine, and now moving into western and southern Russia – major wheat and corn regions.

But the market appears to be focused on just the U.S. for now, with cooler temps forecast for the north and Midwest, even if rains continue to be limited. The month of June has seen precip well below normal even into the western Midwest, but with cooler temps, the stress to crops is still minimal. The eastern Midwest is looking generally good for moisture so far, but keep in mind that a lot of corn had to be replanted in Illinois, Indiana, and Ohio.

While weather is the major driver of price action, a few other things still matter. We got another look at world prices this week with another Egyptian purchase, and found some interesting results. They bought 175 TMT - 120 from Romania and 55 from Ukraine. With a price of around $208/MT, up $1.70/MT from last week’s purchase. 

It was interesting to note that Russia did not participate in the sale, unusual for them. Their offers were $3/MT higher than last week and obviously not competitive with their Black Sea brethren. After a record crop last year, it’s been an interesting marketing year to watch for Russian farmers as they’ve been very slow sellers, even as their next harvest approaches. 

The month of July will obviously be critical for Northern Hemisphere crops. The weather this season has been widely variable and will likely continue that way through the summer, thus more price volatility is likely as well. Corn and soybeans are making new lows on pricing pressure from South America, but wheat is holding its own. 

I look for wheat prices to move higher, as production problems in the EU and Black Sea become better known.

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