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Wheat Market Regains Footing

Wheat prices are up 12%, in August alone.

After last week’s shelling following a surprisingly bearish supply/demand report, wheat markets regained last week’s losses as the bullish fundamentals resurfaced.

While USDA opted to not reduce Black Sea exports, or even Australian production or exports, this week’s news wires reminded us that world wheat supplies are in fast retreat and export activity is migrating to the US.

There was a report late in the week that the Russian Ag Minister met with Russian grain exporters, discussing slowing wheat exports once they reached 30 MMT. USDA projects Russian wheat exports at 35 MMT. There appears to be pressure from Russian livestock producers to protect domestic feed grain supplies. Interesting, considering there would be more feed wheat available after rains on mature wheat reduced quality in the central region.

This follows rumors two weeks ago that Ukraine basically had a similar meeting with their grain exporters – slow down exports to protect domestic supplies and whatever they do, don’t sell any wheat to Russia. Still think that is the canary in the coal mine.

World trade activity tends to pick up this time of year, when harvest supplies are readily available. Russia did sell 360 TMT to Egypt this week, along with Romania’s 60 TMT. Cost was about $5/MT lower than the last sale in early August.

But, here in the US, wheat traders kept pointing to slow exports as evidence that perhaps the fundamentals weren’t all that bullish. Understandable, considering the slow pace this year which is well behind last year. However, last week’s sales suddenly surged to 803 TMT, about double what we were used to seeing. Hard red winter wheat took the most at 380 TMT.

Clearly, the US is competitive with the rest of the world and buyers are looking for quality milling stocks, which we have. In addition to the strong sales last week, Iraq bought 200 TMT of milling wheat this week, adding to the optimism that demand is finally coming around.

To be sure, the Black Sea region will continue their aggressive sales pace for as long as they can. It makes sense for Russia to move as much as they can before ports freeze over, and then likely be done for the marketing year. Competition from Europe and the Southern Hemisphere will be down significantly, opening the door for much better US business during winter and spring.

Wheat also still needs to find more acres quickly for winter wheat plantings, or it will be left to the spring wheat market to do that in March/April?

I believe that fundamentals are solidly bullish, and without a sharp rally in the near term the market will grind its way higher over the next several months. I expect that breaks will be well supported.

While Kansas City would be the go-to market for quality fundamentals, Chicago will also be the go-to market for general bullish trading. It’s hard to guess which will out-perform the other, but if this week’s price action is any indication, it looks like Chicago still is where the large traders want to be in the short/medium term. Chicago was up 14 cents on the week, KW up 5, Minn unchanged. Ultimately, I think Kansas City will gain on Chicago, but that might be in the later stages of the bull run. We are still in the early stage.


Louise Gartner,
Owner, Spectrum Commodities

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

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