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Wheat Rallies Met By Selling

Funds are liquidating wheat positions.

A couple of small rally attempts this week were met with eager selling, particularly later in the week when weather forecasts hinted at rains coming to the plains. Winter wheat markets were quick to give up their weather premiums and ended the week at or back into February’s trading range.

Thursday’s price action, especially, appeared to a reality check for the wheat complex. Early morning prices were notably higher, but a dismal export sales report erased the enthusiasm and the session ended with an outside day lower. Friday saw continued selling that gained momentum as weather forecasts brought rains into the plains for as early as next week.

The weather premium is mostly gone, and if the weather pattern is changing with more rains on the way, then prices will most likely go even lower.

The Australian Weather Bureau announced this week that LaNina has officially ended and is expecting neutral ENSO for the remainder of 2018. Already we are seeing rains coming to parched Argentina, and we could expect a more normal rainfall pattern for the US southern plains.

NOAA is projecting more rains for the northern plains and Midwest from April-June. In the southern plains, they still suggest above normal temps and below/normal precip. But just a few timely rains are all the wheat crop needs, and it appears that one may be on the way.

However, that said, we are at strong support levels in Kansas City, and into the Feb trading range in Chicago. Minn is basically testing major lows that have held for weeks; with planting season just around the corner, Minn will likely hold until acreage can be assured. The acreage report on March 29 will give more direction.

Egypt this week purchases 240 TMT; half from Russia and half from Romania. Prices were $4/MT higher than last week. Even with world prices moving higher on higher Russian prices, the US is still priced well above the competition, confirmed by the poor export sales number. We’ve shaved 50 million bushels off export projection over the last two months, and it looks like there is more to go with the very slow pace.

Commitment-of-Traders reports showed that large fund traders were generally liquidating wheat positions, but are still short Chicago long Kansas City and Minn. They aggressively added to their longs in corn and soybeans, which for the most part, is not working for them.

Technically, with the rally fading, we could be confirming longer term highs. We’ll have to see if the supports hold. If they do, I still think it could be the base of another leg higher that would at least test the early March high, and likely take it out. If the rains keep coming, obviously, that will be hard to do in the short run.


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