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Wheat’s Weather Premium Is Gone

Wheat continued its selling last week on expectations for more rain to come to the parched western Plains. A gap lower opening on Monday below the important support levels made it clear that the bears were in charge.

Prices quickly pushed down to the swing highs from January where they finally found support, getting a reversal higher on Friday. The gap above the market, however, remains a notable resistance level.

The rains have come to the eastern Plains but didn’t expand into the West. The short-range forecasts suggest the dry areas will remain dry with above-normal temps. As we turn the calendar to April, moisture demand will sharply increase, but relief does not appear to be coming.

The hard red winter wheat crop is already near the worst condition in history for the Plains states. The weather outlook makes it harder to think this crop will make it to the finish line. Farmers have important decisions to make regarding tearing up acres and planting a different crop; perhaps no rain makes it an easier decision.

For the northern Plains where drought was well established since last spring, plenty of snow and rain recently should help get spring crops off to a good start. The market is already expecting an increase in spring wheat acres, with good yields certainly a possibility. The world could use a good hi-pro wheat crop.

The sell-off of the last two weeks has virtually eliminated all the weather premium in the wheat complex. It has also aligned U.S. prices much better with world prices. Export sales last week reflected that with sales of 429 TMT, the best we’ve seen in weeks. Unfortunately, we’re still running well behind the pace needed to meet USDA’s projections, so another reduction is likely coming.

The Commitments of Traders report had some interesting data. Large traders significantly reduced their short position in Chicago wheat and reduced both longs and shorts in Kansas City but are still net long. Yet, in Minneapolis spring wheat they shifted from a net long to net short. They are rarely short spring wheat, but clearly, they expect more price pressure for the Minneapolis market. Not that they are always right; they’ve been on the wrong side of soybeans and corn for weeks.

The quarterly stocks and spring plantings intentions reports will be out on Thursday, and markets will be nervous ahead of them. They are also nervous about the trade war banter with tariffs being slapped on left and right. Tariffs aren’t good for anyone, but it looks like that’s the road being chosen, so we can expect more market volatility – and usually bearish – if this trade war escalates.

For daily commentary and hourly market reports on wheat and cattle, listen to my podcast at

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