Afternoon wheat: Solid weekly performance for both KC and Mpls
Price action today was almost a carbon copy of what we saw Thursday in that Mpls wheat led, both KC and Chicago struggled to keep up, then when those markets started to break down it put a ceiling on Spring wheat futures. But not before trade was able to take out yesterday's highs, thus making it seven consecutive sessions in which Mpls wheat has made a higher high. Trade today in Mpls reached more than 14 cents higher early in the day, but the weakness in Chicago and KC late in the day eventually started to weigh on Spring wheat futures and the market finished around four cents higher. The combination of Sept expiration and strong flat price trade this week gave Spring wheat futures a huge gap higher move on the weekly chart, showing gains of more than 31 cents. Technically, Mpls Dec finished the week around 19 cents higher. Still, if we see additional problems next week with harvesting the final 24 pct of the crop, and the market could follow up this week's performance with another higher weekly close next week, you could give this market some power to the upside. But first you need to settle the board higher next week. KC wheat did not trade as strong as Mpls this week, but it is in the same position and the same thought process applies. Despite today's two-cent losses, because of how September expired, on the weekly chart, HRW wheat futures also posted a gap higher weekly move, gaining 24 cents higher. Technically, KC Dec only finished eight cents higher on the week. Chicago wheat futures did not benefit from the September expiration, and it did not fare as well in flat price trade neither as it lost three cents to KC and 18 cents to Mpls. The market finished the poorest today as it lost almost four cents, and on the weekly chart, SRW wheat futures posted a loss of 1 ½ cents.
Headlines news of another EU wheat production increase along with positive data out of Russia's wheat crop may have been behind the selling leading up the morning pause and may have been behind why the markets were unable to extend gains very far during the day. If those headlines stalled the rally, the story that broke late morning that talks between President Trump and the China delegation ended abruptly and the China delegation went home early deflated any hope that the markets would find its second wind and finish the day strong.
As we look ahead to next week, the focus initially be on the condition reports Monday afternoon. How far along will Spring wheat harvest be, or better yet, how much further behind has harvest fallen? Also, how far along is winter wheat planting, and is talk continuing to build of reduced acreage? The markets will also focus on how much more damage have the rains across the northern plains brought onto the Spring wheat crop. By the end of the week the market will be shifting its focus to the quarterly stocks report Monday the 30th and the small grains report that goes with it. The report gives us our first quarterly stocks data of the new marketing year, and it will give us our final winter wheat production from this past year - including class break down, yield and acreage (of last year) and updates their thought on Spring wheat acreage and production for this year.
In Friday afternoon's commitment of trader's report, we were expecting the fund position in Chicago wheat to be roughly unchanged week over week, and what the data showed was that we were almost right on as funds were buyers of 844 contracts of Chicago wheat ending Sept 17. At that time, it lowered their net short position to around 44,350 contracts. In KC, funds were buyers of around 3,300 contracts, which at the time lowered their short position to 30,150 contracts. As far as managed money, they were buyers of around 1,800 contracts in Chicago, which at the time, lowered their net short position to just under 12,600 contracts. In KC, managed money bought around 4,000 contracts, which at the time, lowered their net short position to just under 37,600 contracts.
IEG Vantage (Informa) projects next year's 2020 US wheat acreage to be around 45.4 mil acres and yields for next season to be roughly 49 bu/acre, which would put US wheat production at 1.932 bil bu. Analysts and traders say the 45.4 mil acres would be a record low for wheat planting, but keep in mind, each of the past few years have seen acres gradually declining.
A Russian grain union top executive said the group is forecasting total 2019/2020 grain production at 121 MMT, which is off 7.0 MMT from their July estimate. Despite the reduction, they still see total grain exports at over 47 MMT, which is at the top end of their previous estimate of between 46 and 47 MMT. The quality of the crop continues to improve year over year, and because of that, has opened the door recently to Saudi Arabia. Russia's goal is to grab a larger percentage of the Middle Eastern and North African tenders, taking away from markets such as the EU or US.
IKAR kept its 2019 wheat crop forecast steady at 75 MMT but did say this figure could climb. They also said they expect this year's overall grain harvest to be around 122 MMT.
COCERAL increased their 2019 EU soft wheat production estimate by 3.0 MMT up to 143.3 MMT. Just yesterday Strategie Grains increased their latest estimate for 2019/20 EU soft wheat production by 1.6 MMT up to 144.5 MMT.
According to data from the Canadian Grain Commission, as of September 15, durum wheat exports so far this season are up 95 pct year over year at a little over 611 TMT, while wheat exports are down roughly 14 pct year over year at 1.82 MMT.
As of October 1st, Morocco's gov't will lower its customs duty on soft wheat from 135 pct down to 35 pct. Shortly after this announcement became official, Morocco's state grain buyer said they will re-issue 576 TMT milling wheat and 345,455 mt durum wheat tenders under preferential tariff quota for US wheat. Remember, two weeks ago Morocco's ONICL did not receive any offers in its tender for 576 TMT of US milling wheat and 345,455 mt of US durum wheat via preferential tariff quota. Then, the ONICL announced an additional tender to buy 576 TMT of milling wheat and 45,455 tonnes of durum wheat from the EU under a preferential-tariff quota.
Export business this week:
*** Thursday, Tunisia bought 42 TMT of soft wheat. They reportedly paid $210.68/mt CIF for 25 TMT of wheat, and $212.50/mt CIF for 17 TMT.
*** Thursday, Japan bought 127,893 mt of Aussie, Canadian and US wheat. The total included 34,583 mt of Aussie white, 25,040 mt of Canadian red, 34,335 mt of US HRW, and 33,935 mt of US white wheat.
*** Wednesday, Egypt bought 180 TMT Russian wheat for Oct 21-31 at $210.73 to $211.20 but passed on the tender for Nov 1-10 shipment.
*** Wednesday, Algeria is said to have bought upwards of 600 TMT of milling wheat, with prices ranging from $211 to $213/mt CIF. The grain is for shipment in November. Their prior purchase was back on July 31, and they bought 570 TMT.
*** Tuesday, Turkey is said to have bought around 250 TMT in a total of 25 separate 10 TMT tenders in which each was seeking 13.5 pro red milling wheat. Prices ranged from $202/mt all the way up to $207.50/mt CIF.
*** Jordan made no purchase in their tender for 120 TMT of opt origin wheat.
*** Sept 24 Taiwan flour mills are in for 110 TMT of US milling wheat.
*** Sept 24 Jordan back in for 120 TMT of opt origin milling wheat.
*** Oct 23 Ethiopia is in for 400 TMT of milling wheat.
*** Columbia for wheat.