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More Mixed Markets, Analyst Says

U.S. and world wheat ending stocks keep growing, pressuring prices.

Wheat markets were mixed for the week, with Chicago losing to both Kansas City and Minneapolis. For the week, Chicago was down 3, Kansas City up 3, and Minneapolis up 9.

The second bomb cyclone this spring hit the northern Plains and dumped near-record snows across a region that has already seen its share of weather this winter/spring. It added to flooding problems in the eastern central Plains and western Midwest.

There is chatter about more planting delays, but corn plantings would be the biggest problem at this point. Spring wheat still has plenty of time to get into the ground.

Crop conditions improved from last week, with hard red winter still on track for impressive yields. Soft red has had a rougher start this spring, but conditions improved there as well. Spring wheat plantings were just 1%, with progress just in the Northwest. Texas was 15% headed out with Oklahoma just starting to see some heading as well. Hard red winter is moving along quite well, and the trade is talking about above-average yields. At this point, it is soft red winter that looks most vulnerable to production losses.

The rest of the Northern Hemisphere is generally looking fine. Some dry pockets have developed in the Black Sea (mostly Ukraine) but they are forecast to see notable rains in the coming week. The North China Plain also had a dry spell but has seen some recent rain relief. Most of their wheat is irrigated, anyway.

Obviously, the market will pay close attention to these other major producing regions, but their growing seasons are just getting started and so far, we don’t see major trouble looming.

USDA released the April supply/demand report on Tuesday, with data that was generally bearish. Wheat ending stocks in the U.S. were pegged at 1.087 billion bushels, up 15 million from the average estimate and up 32 million over last month. Exports were lowered 20 million bushels and feed usage dropped 10 million. World wheat end stocks were 275 million metric tons up 4.0 million mt over the average estimate and up 5.0 million mt over last month.

Export sales were well below last week’s huge number, but still fell within the range of expectations. At 474,000 mt., it keeps up on pace to meet USDA’s projections. Of the total, 19% went to hard red winter wheat at 90,000 mt., 29% to spring wheat at 137,000 mt, 30% to soft red winter at 140,000 mt., and 16% to white wheat at 75,000 mt. Buyers were the usual customers, with no major purchases.

Egypt was back in the market this week, unusual for this time of year as they typically buy from domestic sources during April. But cheap prices brought them back to the table. They bought 240,000 mt. total with 180,000 mt. coming from Romania and 60,000 mt. from Ukraine. The U.S. had the lowest FOB offer, but transportation costs bumped us out of the competition.

Seasonally, we tend to see wheat prices move higher into early May. With the selling pressure we’ve seen recently, we could actually see a notable rally and still not break the longer-term bear chart pattern. The old trading range lows from this winter should hold this market unless we get some serious production issues, but that does not seem to be a concern at this point.

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