Afternoon wheat: A sluggish start to the week

The wheat complex saw slightly lower price action throughout the night as trade mostly followed the weakness coming out of corn and soy after a weekend in which most of the belt received heavier than expected rains. That trend continued throughout the day, albeit in a very light-volume, yet choppy trading day. SRW wheat futures mostly traded between one-cent and six-cent lower. The highs of that range were made shortly after we started the day, while the lows were made right around the close - which is not a good way to finish a day. HRW wheat futures stayed in an even tighter range - 2 ½ to 5 ½ cents lower, but KC wheat did settle near their session's highs with the help from some late buying in the KC/Chicago spread.

There was not a whole lot of influential news around this morning. Black Sea prices for 12.5 pro wheat fell around a dollar week over week and were roughly thought to be trading around $193/mt FOB according to both SovEcon and IKAR. The US continues to be uncompetitively priced in that part of the World - the GASC tender last week showed us that, so lower Black Sea wheat offers may have weighed on futures here in the US a little. On the export front, Morocco's ONICL is in for US milling wheat and US durum via preferential tariff quota. Other than that, all is quiet.

If corn and beans can rebound a little tomorrow, it will probably have to be the KC market in wheat to get trade motivated in the wheat complex. The modest three-day streak of consecutive higher closes came to an end today in HRW wheat futures, but the key to this week's trade is for Sept KC wheat to trade and settle above the 4.00 level, so that the Dec can make a run at 4.20. Not that trade would be able to extend to much further from those levels, as there really is no bullish impetuses around for wheat right now, but it might be enough to say a bottom is in for the moment. Chicago is different in that trade is still far away from its Springtime lows, and over the past five days it has given no indication that it is ready or even wants to rally. If this market is not willing to partake in any rally, then the wheat complex as a whole will struggle to rally. And we all know that when we usually see a lower close on both Monday and Tuesday, it usually does not bode very well for the week.

Weekly crop conditions:
Overall Spring wheat conditions may have improved slightly week over week.
Idaho: conditions were basically unchanged week over week. G&E was pegged at 69 pct vs 70 pct last week and 72 pct last year. P&VP was pegged at 7 pct vs 9 pct last week and 10 pct last year. Harvest moved up 12 and is now 27 pct complete.
Minnesota: conditions were unchanged week over week. G&E was 83 pct vs 83 pct last week and 75 pct last year. P&VP was 2 pct vs 2 pct last week and 1 pct last year. Harvest moved up 6 and is now 14 pct complete.
Montana: conditions improved slightly week over week. G&E was 61 pct vs 61 pct last week and 60 pct last year. P&VP was 12 pct vs 16 pct last week and 12 pct last year. Harvest moved up 10 and is now 20 pct complete.
North Dakota: conditions were basically unchanged week over week. G&E was 71 pct vs 71 pct last week and 82 pct last year. P&VP was 7 pct vs 6 pct last week and 2 pct last year. Harvest moved up 7 and is now 12 pct complete.
South Dakota: conditions improved week over week. G&E was pegged at 67 pct vs 62 pct last week and 51 pct last year. P&VP was 5 pct vs 6 pct last week and 13 pct last year. Harvest moved up 11 and is now 27 pct complete.
Washington: conditions fell slightly week over week. G&E was 64 pct vs 66 pct last week and 78 pct last year. P&VP was pegged at 3 pct vs 6 pct last week and 4 pct last year. Harvest moved up 7 and is now 25 pct complete.

HRW wheat states:
Colorado: Harvest moved up 1 and is now 97 pct complete.
Nebraska: Harvest moved up 6 and is now 96 pct complete.
South Dakota: Harvest moved up 8 pct and is now 76 pct complete.
Kansas, Oklahoma and Texas: Harvest is complete.

SRW wheat states:
Arkansas, Kentucky, Illinois, Indiana, Missouri, North Carolina, Ohio & Tennessee: Harvest is complete.
Michigan: Harvest moved up 6 and is now 95 pct complete.

Headline news:
Export inspections this morning came within expectations at 489 TMT vs an adjusted 710 TMT (21 TMT increase) and 488 TMT this time last year. Included 154 TMT of HRS, 131 TMT of HRW, 86 TMT of SRW, 60 TMT of white and 30 TMT of Durum. Current market year to date is 5.445 MMT vs 4.354 MMT this time last year. One cargo each was sent out to Mexico, Japan, the Philippines and Iraq. Of the smaller cargoes, ½ cargo being sent out to Brazil might have been the most surprising, as the rest of the business looked to be rather routine.

The Russian Ag Ministry said that as of Aug 16, Russia has harvested a total of 69.1 MMT of grain, of which 53.7 MMT is wheat. This time last year Russia had harvested 52.4 MMT of wheat. The average yield thus far 3.55 tonnes per hectare vs 3.44 last year.

SovEcon estimates Russia's August exports of wheat will come in around 3.6 MMT vs 2.936 MMT last month. This is well behind last year's pace when Russian exported 3.844 MMT of wheat in July and 4.693 MMT in August. However, keep in mind there was panic on the street with last year's Russian wheat crop, and they had a HUGE first half export program on the fear the country was going to place restrictions on wheat exports. It never happened. This year's export pace is more in line with past years.

Ukrainian wheat exports rose to 1.04 MMT last week vs 814 TMT the week prior.

There is a vessel of French wheat being loaded for shipment to China. France typically ships barley to China. This is the country's first wheat shipment to China since late last year, and that shipment was the first to China in almost five years.

It will be hard for Romania to compete in the Algerian market this year as the quality of the Romanian wheat crop will have problems with Algeria's strict 0.1 pct limit on bug damage to their wheat imports. Dry weather in Romania created more bug damage this year. Algeria mostly looks to the French for wheat imports anyways, so it may not be too big of a deal in that part of the World, but Egypt has strict guidelines as well, and it will be a much bigger issue there if Romania cannot meet their standards.

The wheat/corn spread (basis the Dec) was looking to rebound after a poor finish to the week last week which saw the spread lose more than eleven cents. It was able to accomplish that feat as the spread traded a bit stronger throughout the night and day sessions - thanks to the weakness coming out of corn. Like most trade, did not see much of a range today. Last week's highs have become the key to extending the rally in the spread. With the Dec spread not reaching its June highs, not only is that spread going to find selling near last week's highs around 1.08, but as it gets closer to their June highs of 1.13, we could expect scale up selling to surface and for that level to provide some tough resistance. Two levels of resistance in this spread seems a bit much to try and overcome. Would rather join the crowd and be a seller near last week's highs and risk a close over the June highs.

The KC/Chicago spread started the evening around three cents higher as trade was trying to build off its strong finish to the week last week. The spread barely tested that area overnight before reversing and finishing the night a couple cents lower. It was important that the spread found early support as additional weakness would have been enough to make a run at Friday's lows, and that would not have been a very positive trade. Mostly, the spread bounced around throughout the morning, but over the final hour of the day a bid surfaced which helped trade finish up near its session's highs. Still expect plenty of selling in the 64 to 60-cent area. If trade is able to rally through the 64 to 60-cent area, the 50-cent area might be twice as tough to get through. For now, nothing exciting here. We probably just see choppy trade this week.

Export business this week:
*** Morocco's ONICL is in to buy 576 TMT of US milling wheat, and 345,455 mt of US durum wheat via preferential tariff quota.
*** Aug 20 Jordan is back in for 120 TMT of opt origin wheat.
*** Nigeria for wheat for August.
*** Columbia for wheat.