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Wheat Sees Mixed Trade, Analyst Says
Wheat markets had a mixed week, with Chicago leading higher on a 10¢ bump, but Kansas City barely managing a higher print for the week while Minneapolis lost 32¢.
Obviously, spread trade was active this week, with spring wheat giving back a big chunk of its gains against Chicago.
Even though USDA is forecasting a decline in spring wheat acres, Minneapolis hasn’t been able to find any support since last week’s plantings report. With the slow start to fieldwork across much of the northern Plains, we could see even fewer acres actually get planted. There was talk this week that Canada would see a drop in canola acres in favor of spring wheat.
Crop conditions improved for hard red winter wheat this past week, but declined for soft red, helping explain the surge in the Chicago/Kansas City spreads. Hard red winter wheat production prospects are growing by the day with plenty of moisture and little stress to the crop. Soft red, on the other hand, did have some winter stress and is now facing excessive rain and flooding stress in important growing areas.
Hedge funds are carrying a record short position in the Kansas City market, making rally efforts anemic. They are also net short Chicago, but not as aggressive of a position as Kansas City. They are generally bearish the grain complex; without trade agreements with China or Mexico, have little reason to change their attitude.
That said, with virtually no weather premium built into current prices, one does have to be cautious about weather surprises. So far, we don’t see anything on the horizon that would threaten the crop, here in the U.S. or in the Northern Hemisphere.
Europe and Black Sea producers are actively planting, with Ukraine reporting that 73% of projected spring wheat acres are now planted. France reported that 8% of its corn crop is planted, and that 84% of the winter crops are in good/excellent condition.
Next week, we get the supply/demand report, which will reflect larger stocks reported in the quarterly stocks report from March 29. There is plenty of grain around here in the U.S., and world stocks are adequate as well.
Export sales for wheat were definitely a bright spot this week, with a whopping 1.017 MMT sold, far above the high end of expectations. Most of the business went to hard red winter at 392 TMT (39%), with 300 TMT of that going to Iraq. Spring wheat made up 28% of the sale, soft red 16%, and white wheat 17%.
The market got a nice bounce initially from the export sales number but couldn’t hold the gains and ended on the lows of the day on Thursday, followed by more selling Friday. Minneapolis put in new contract lows every day this week, while Kansas City is hovering just above its contract lows. Chicago is well above those respective lows but is having trouble maintaining upward momentum as well.
With the prime time window past for U.S. exports, we see foreign competition still as acute as ever for old crop. New-crop offers are under pressure as early crop progress suggests a big hard red winter crop here in the U.S. and big wheat crops among other major exporters. Even Australia is getting some rain with planting season just around the corner.