Wheat morning update and commentary: A firm start to the day
It was a big harvest weekend for wheat, but you would not know it by how the wheat complex finished the night. For much of the night price action would mirror what we would typically see after a harvest weekend - slightly lower trade. But, in the final few hours leading up to the morning pause the markets rallied from a penny or two lower to around nine cents higher in both Chicago and KC. Even Mpls came along for the ride as the Spring wheat contract finished the night around seven cents higher. We did see mill bids for HRW wheat firm on Friday - they were up 20 in 11.4 pro and up 9 in 11.6 pro putting both 170 bid. The 12 thru 14 pro were all up 7 and were 180 bid going home Friday. Sounds like there were expecting some harvest delays this weekend, and I am sure there were as heavy rains were seen across southern Illinois, Missouri and Kansas, but I don't think that was behind the late rally as for much of the night price action was a little weaker. Last week we talked about how the wheat complex would need a trigger to ignite a sustainable rally through harvest, and one influence I see this morning is that corn, beans and meal are all trading higher, meaning today may be shaping up to be a "risk on" day for grains. Another possible influence could be the US Dollar falling to levels not seen in three months - as that should be a little supportive to trade across the entire grain complex. And finally, there is a growing concern about the extreme heat expected for Europe this week. Some areas across France is expected to see temps reach 40C, and this heat looks to make its way into parts of Germany as well. The issue I have is that this is not hot temps do not look to be very lasting as showers and cooler temps are expected in those regions next week. Keep in mind, last Sunday night the wheat complex finished the evening around nine cents higher and by the end of the day it was trading mixed to slightly lower.
This afternoon we get condition reports and harvest progress. The last few weeks have been a little surprising in that HRW wheat conditions have been improving a little. Last week's report showed that Winter wheat harvest was only 8 pct complete (up only 4 week over week) vs 25 pct this time last year and the five-year average of 20 pct. Think the USDA was a little off on that assumption. Think they adjust this week and we see harvest close to 30 pct complete. I am looking for HRW and SRW conditions to be off a little, while Spring wheat conditions remaining outstanding.
We have a couple reports later this week with Stats Can coming out Wednesday morning and a planted acreage (important) and quarterly stocks report (not very important) on Friday morning.
Traders and analysts noted Russian new wheat crop Black Sea prices were off one dollar from last week and is now trading around $194/mt FOB. They attributed the lower prices to start of harvest, that offset hot weather risks.
India weather bureau officials say monsoon rains have covered nearly half the country and conditions are setting up so that it will slide into central and western India. The annual rains are helping to push farmers with their planting of summer crops.
The Iraqi trade ministry said the gov't there has bought over 3.2 MMT of domestic wheat from this season's harvest.
Chinese customs data released Sunday shows May 2019 wheat imports totaled 210 TMT, which is off more than 67 pct from the year ago month. It brings their cumulative Jan thru May total imports to 1.45 MMT, which is off more than 11 pct from the 2018 period.
China wheat harvest is said to be around 90 pct complete. Quality has been better than normal.
The CFTC's weekly commitment of trader's report Friday afternoon was thru June 18, and we were expecting funds to be buyers of around 13,000 contracts of Chicago wheat during the week. What the data showed was that the funds were buyers of roughly 19,200 contracts of Chicago wheat. At that time, it lowered their net short position to around 24,900 contracts. In KC, funds were buyers of around 1,500 contracts, which leaves them still short around 22,000 contracts (as of the close Tuesday). As far as managed money, they were buyers of 21,000 contracts in Chicago, which at the time, increased their long position to around 22,700 contracts. In KC, managed money bought 2,900 contracts, which at the time, lowered their short position to around 20,750 contracts.
Export business this week:
*** Taiwan's Flour Millers' Association bought a total of 83,200 mt of US milling grade wheat over the weekend. The total included 43,700 mt of US DNS at $234.13/mt. The balance of wheat was HRW. Prices on a FOB basis were $236.31/mt for 12,850 mt and $245.56/mt for 13,750 mt; $225.19/mt for 5,875 mt of white wheat and $229.70/mt for 7,025 mt of white wheat.
*** An Indonesian importer bought 50 TMT of Black Sea wheat for LH August shipment. They reportedly paid $213.50/mt CIF for the cargo.
*** June 26 Jordan is back in for 120 TMT of opt origin milling wheat.
*** July 1 Jordan's state-run Silos and Supply company is on for 25 TMT of wheat.
*** July 8 Syria in for 200 TMT of Russian wheat.
*** Columbia for wheat. Nigeria for Aug wheat. Indonesia is in for wheat.
*** Brazil taking offers for September.