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Wheat Markets Continue to Sell Off

Wheat markets started this shortened week the way it ended last week - more selling. Trading range supports melted away last week and the weakness continued into Wednesday. Thursday saw wheat come up for air on talk that China offered to increase ag purchases by $30 billion per year; yes, that would in addition to the roughly $19 billion they were spending before the trade meltdown.

The obvious questions of how they could handle that much volume, or if the US could even supply it didn’t really seem important. Perhaps so, until Friday, when wheat retreated even after an impressive export sales number. Minneapolis was the star performer, as it surged higher on Friday and held most of those gains even when the winter wheats turned lower.

Export sales were finally caught up this week, with a full six weeks of data dumped on Friday. Total sales were 3.8 MMT, well above the range of estimates from 2.1 MMT – 3.3 MMT. Hard red winter wheat made up 45% of the total at 1.7 MMT, soft red was 14% at 515 TMT, spring wheat was 16% at 623 TMT, and white wheat was 18% at 667 TMT.

Of the hard red winter wheat total, Egypt bought 121 TMT, and Nigeria 344 TMT. Of the soft red total, we saw Egypt take 126 TMT. China was noticeably absent from the sales except for 32 TMT of spring wheat. It should be noted, however, that unknown bought a total 336 TMT of hard red winter and 74 TMT of white wheat.

It appears the world has more wheat this late in the season than expected and sellers are getting aggressive. Egypt bought another 360,000 MT this week, and the US was so far out of the running no one even bothered to make an offer. The sale went to France for 180,000, Russia for 60,000, Ukraine for 60,000 and Romania for 60,000. Obviously, our prices will need to track world price, and the aggressive selling pace suggests the upside is limited.

The Ag Outlook Forum took place this week, with USDA projecting all wheat plantings at 47.0 million acres, down 800,000 from last year. Corn acres were pegged at 92.0 million, up 2.9 million over last year, and soybean acres were estimated to be 85.0 million, down 4.2 million from last year.

All wheat production was estimated at 1.9 billion bushels, up 18 million over last year. Wheat ending stocks for 2019/20 were pegged at 944 million bushels, down 66 million from this year. Corn production was pegged at 14.9 billion bushels, up 500 million over last year. Corn ending stocks were estimated at 1.65 billion bushels, down 80 million from this year. Soybean production is estimated to be 4.2 billion bushels, down 300 million from last year, with ending stocks down 50 million at 845 million bushels.

Technically, Kansas City and Chicago wheat easily melted through trading range support and came within 10 cents of reaching the downside target once it broke that support. A late-week bounce couldn’t gain much momentum and fizzled on Friday. Minneapolis is the clear winner as it has performed much better than the winter wheats, managing to stay in positive territory even when KC or Chicago turned south.

I would expect that the winter wheats will now find resistance at the old trading range lows, and ultimately still see one more push down to reach downside targets before we find the seasonal lows.


Louise Gartner

Owner, Spectrum Commodities

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