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Wheat going nowhere fast

Going nowhere fast could easily describe this week’s price action across the wheat complex. More freezing temperatures in the southern Plains and more reports of damage did little to boost bullish sentiment.

More snow across the northern Plains and Midwest is adding to the probability of reduced spring wheat acres and Minneapolis futures managed to gain some leadership, but it was hardly noticeable. 

With crop conditions improving for soft wheat and showing little deterioration so far for hard red winter, traders are just holding back until they see more hard evidence of what kind of production has actually been lost. It could be well into harvest before we know the complete story. 

The moisture that has fallen across the heart of drought country is creating more pressure than the fear of yield losses. In addition, several analytical firms are also projecting major bear markets for the grain complex, so bulls are keeping to the sidelines. By the way, there are more freezing temps coming again next week. That would be the fourth freeze event this season – wow.

There are some firms, however, that are beginning to look at a more bullish outlook. Europe’s Societe Generale placed a buy recommendation for U.S. hard red winter wheat, projecting major production losses across the south and mentioning issues in Europe as well.

The growing season is still early for Europe and the Black Sea region. China’s crop is well underway, with some dryness noted in the North China Plain. That usually doesn’t mean much since most of their wheat is irrigated, but it certainly could spell problems for corn production down the road. 

Export sales were huge this week, but again couldn’t shake the bearish attitude in the wheat complex. Total sales of 1.675 MMT were split between 552 TMT old crop and 1.123 MMT new crop, of which 840 TMT were the China sales we’d heard about last week. 

Demand is definitely improving for U.S. wheat and will likely remain strong as long as our prices stay stuck in this tight range.

For now, wheat is just pacing sideways, waiting to hear about freeze damage in the South, expecting big crops out of the Midwest, and nervously watching the northern Plains get yet more snow when they should be already in the field.

I would expect that as production losses actually find some solid numbers over the next few weeks, the market will be better supported, but for now it’s looking like traders are watching moisture fall in the central Plains and are willing to wait until harvest before getting too nervous about total crop size.


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