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3 Big Things Today, May 18, 2022

Wheat Futures Drop Overnight; Seasonal-Average Price Expected to Hit Record

1. Wheat Futures Plunge in Overnight Trading

Wheat futures dropped overnight amid profit-taking after prices rebounded yesterday and after India said it would relax an export ban that was implemented last week.

Prices yesterday rose after being down in the overnight session, pushing futures up more than 8% in two days, after India on May 13 said it would ban wheat exports to ensure domestic supply.

On Tuesday, the Indian government said it would allow "some relaxation" of the ban and honor contracts for wheat awaiting customs clearance.

"It has been decided that wherever wheat consignments have been handed over to customs for examination and have been registered into their systems on or prior to (May 13), such consignments would be allowed to expand," India's Ministry of Commerce and Industry said in a statement Tuesday.

Ukraine's deputy economic chief reportedly said exporters have been making progress shipping wheat over land to the European Union, but sea access must be re-established to avert food crises in some areas.

Investors also are watching the Kansas Wheat Tour where crop scouts are checking on the hard-red winter-wheat crop in the U.S. southern Plains.

Yields in central and northwestern Kansas are forecast by participants in the tour at 39.5 bushels an acre. The same area last year was projected to produce 59.2 bushels an acre.

Drought conditions have hurt the hard-red winter crop this year. Little rain has fallen in parts of western Kansas and the Oklahoma and Texas panhandles in the past month, according to the National Weather Service's precipitation page.

Wheat for May delivery plunged 30 1/4¢ to $12.47 ¼ a bushel overnight on the Chicago Board of Trade while Kansas City futures dropped 35 1/2¢ to $13.32 ¼ a bushel.

Soybean futures for July delivery rose 5 3/4¢ to $16.83 ¾ a bushel. Soymeal added $2.20 to $414 a short ton, while soybean oil futures fell 0.41¢ to 83.08¢ a pound.

Corn futures were down 1 1/4¢ to $7.99 ½ a bushel.

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2. Wheat Seasonal Average Price Expected to Hit Record

U.S. wheat prices may have plunged overnight, but the season-average farm price, or SAFP, for the 2022-2023 marketing year is forecast by the government to hit $10.75 a bushel due to tight domestic inventories, the USDA's Economic Research Service said in a report this week.

Drought hurt stockpiles of hard-red spring, durum and white wheat in the 2021-2022 marketing year that ends on May 31, resulting int he smallest U.S. crop in almost 20 years, the ERS said.

Domestic production of wheat for the current marketing year is pegged at 1.65 billion bushels, down from 1.83 billion a year earlier, the USDA said in a report earlier this month. Output will rise to 1.73 billion bushels in 2022-2023.

"For 2022-23, slightly larger production is projected compared to the previous year but this would still be the second lowest in the last 20 years based on pervasive drought in major hard red winter growing areas," the ERS said. "Even with domestic use and exports projected down from the previous year, ending stocks are forecast to decline once again."

Wheat futures are up just over 61% so far this year.

U.S. wheat growers are expected by the USDA to produce 1.17 billion bushels of winter wheat in the 2022-2023 marketing year, down 2.3% from the previous year as harvested area will fall 4% due to higher abandonment, the ERS said. Hard-red winter output is seen at 590 million bushels, down 21% year-over-year, and soft-red winter production is pegged at 354 million bushels, a 2% decline.

White-winter wheat production, meanwhile, will jump 38% to 230 million bushels, the government said.

Durum and other spring output is forecast to jump 51% to 555 million bushels, offsetting some losses in winter wheat.

The stocks-to-use ratio for wheat is now at 32.8%, the lowest since the 2013-2014 marketing year, the USDA said in its report.

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3. Flooding Continues on Red River of the North

Flooding continues today along the Red River and its tributaries on the border of North Dakota and Minnesota, according to the National Weather Service.

At Pembina, North Dakota, the river was at 50.8 feet, topping flood stage of 39 feet, the NWS said in a report. The river topped out at 50.9 feet at that point before falling back late last night.

In Fargo, the river is at 25.2 feet, but fell back to 20.9 feet last night. Flood stage is at 18 feet.

"At 25 feet ... city parks and recreation areas along the river begin to flood," the agency said.

In southern Missouri, meanwhile, thunderstorms are possible early this morning, the NWS said. Wind gusts are expected to top 60 miles an hour and hail the size of quarters are in the forecast.

"Flooding from excessive rainfall due to training storms will be possible mainly across west-central Missouri," the agency said. "Isolated strong to severe thunderstorms will be possible Thursday mainly along and east of Highway 65."

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