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Weather Market Creates Volatility

Wheat complex has choppy week.

Another choppy week of trading for the wheat complex, this week dominated by weather concerns in the Black Sea region. Traders jumped on the developing dryness in eastern Ukraine through southern Russia and into western Kazakhstan, only to be reminded by SovEcon, a grains analytical firm actually located in Russia, that the wheat crop is just fine.

The reality check led to weakness on Friday, but the wheat markets were still strongly higher for the week. Kansas City was up 25¢ on the week and up 60¢ from the low of April 24. Chicago was up 28¢ for the week and up 58¢ from its low; Minneapolis was up 15¢ for the week and up 24¢ from the April 24 low.

So goes a weather market – lots of volatility and few winners.

The hard red winter wheat tour took place this week. No surprise they found Kansas yields much less than last year and the five-year average. Statewide yields were pegged at 37 bushels per acre, down from last year’s 48.0 and the average of 41. They noted the lateness of the crop, delayed by the second-coolest April on record. Plants and heads are small, which should make harvesting fun. They estimated total production for Kansas at 243 million bushels, which would be the smallest since 1989.

Colorado and Nebraska also conducted tours, with Colorado pegging yields at 35 bushels per acre, with total production at 70 million, down from last year’s 86.9 million. Nebraska’s average yield was pegged at 43 bushels per acre, with total production at 43.7 million bushels, down from last year’s 46.9 million.

Next week, we’ll get USDA’s first supply/demand estimates for the new crop year. The question is whether they take production down as aggressively as the tour did. It is worth noting that this week the central Plains received very beneficial rains that likely will be huge in helping yields recover as the crop heads into the filling stage.

With the U.S. crop potential coming more into focus, the trade is shifting focus to the Black Sea, which is potentially the spark to light a bullish fire under the wheat complex. The market needed one more production problem in a major exporter to jolt it out of its choppy comfort zone. And the Black Sea would be a doozy. So, no one is ignoring the weather there, even if Andrey Sizov Jr. does tell everyone to calm down.

Meanwhile, U.S. exports have improved over the last couple of weeks, despite our own price rally. World markets have moved higher in step with Russia, whose aggressive selling has depleted supplies in exportable position, creating at least some near-term tightness.

It would appear that wheat prices will stay volatile until we get a better look at Russia’s crop, or a good rain comes for them in the next two weeks. Either way, expect more volatility as the world adjusts to a declining wheat supply for the first time in several years.


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

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