Afternoon wheat: The export sales and crop reports Thursday morning could give the markets an exciting day

After a quiet, two-sided trading session overnight, the markets tried to build upon its gains from Tuesday with an early run during the day session today, but trade lacked the same enthusiasm as we saw yesterday, and the rally quickly stalled. KC was the leader overnight, and that trend would carry throughout the day as after two consecutive days of the KC/Chicago spread moving into new contract lows, it was apparent there was saw some short covering in the spread ahead of Thursday morning's report. KC ended up finishing the day around three cents higher, while Chicago finished flat to a little lower. The most disappointing price action of the past two days has probably come from Mpls wheat as Spring wheat futures did not really partake in Tuesday's rally and finished the poorest, and after early gains today the markets would reverse lower and finish the poorest again today at between one and two cents lower. Keep in mind, in the Sept quarterly stocks report the USDA raised Spring wheat acreage a little, so in tomorrow's balance sheet we will probably see ending stocks for Spring wheat raised a little. With all the wet weather during harvest (and still 9 pct of the crop still to harvest), combined with a winter storm expected for later this week, we will eventually see the USDA adjust their Spring wheat numbers, but it will probably not come in tomorrow's report.

It was encouraging to see the wheat complex try and extend this morning, but we figured it would be tough if corn futures were not going to rally further. We have talked in depth over the past several months about the relationship that KC wheat and corn has formed and that neither will probably distance itself too far from each other at current levels. We have seen in the past - or at least recently - that just a soy rally is not a strong enough motivator to get wheat futures moving. The US looks to be making a lot of feed wheat in the northern plains that is now trading at 85 to 88 pct of corn values. Snow this week in the northern plains will only add to the feed wheat supplies. There is also some fall planted wheat that is not going to get done. Some of this was due to economics of planting hard wheat that only breaks even with the planting cost vs per acre returns on corn and beans that will be planted next spring returning $400 an acre or more.

Export sales will be out in the morning. Last week's report once again came in at the low end of expectations at 329 TMT. There were no surprises in the report like we saw the week prior. It was nice to see Brazil taking in some HRW and SRW (44 TMT combined). Other notable players were the Philippines, Japan, Thailand, Nigeria, Mexico and Italy. Last week we saw the USDA report 130 TMT of White wheat sold to China, two Korean flour mills bought a combined 77,500 mt of US milling grade wheat and Taiwan flour mills bought 110,300 mt of US milling grade wheat. When you combine these sales with the usual players, we should easily top the past few weeks of sales. Look for somewhere around 500 TMT.

Crop report thoughts:
Thursday morning's report is more of a corn and bean report than it is a wheat report, but there will be some changes. As far as the World numbers, production will most likely be lowered in Australia, Argentina and Canada, but that may be offset by increases in Russia and the EU. World carryout therefore is only expected to change by around 1.0 MMT either way - depending on if we see a small increase or decrease in World production. On the US side of the ledger, the USDA will probably lower carryout for 2019/20 a little by using a slight reduction in production and a slight increase in feed. In September, the USDA estimated 2019/20 ending stocks at 2.014 bil bu. They probably will not touch imports/exports, but they may move ending stocks by class around a little. HRW wheat stocks will probably see a slight increase, as will HRS after the USDA raised HRS production Sept 30, SRW will probably be lowered a little and White should be lowered some as well. Durum stocks being raised 36 mil bu last year was one of the surprises of the report.

Headline news:
The Russia's Ag Ministry increased its 2019 total grain production estimate by 2 MMT up to 120 MMT. Of this total, 78.0 MMT is wheat. They pegged 2019/2020 total grain exports at 45 MMT, which includes 36.0 MMT of wheat.

The French Ag Ministry pegged their 2019 soft wheat harvest at 39.7 MMT, which if achieved would be almost 17 pct larger than the crop a year ago and more than 12 pct above the recent five-year average.

France AgriMer increased its estimate for 2019/2020 soft wheat exports outside the EU by 700 TMT up to 11.7 MMT. They also lowered their soft wheat ending stocks by 400 TMT down to 2.9 MMT.

Export business this week:
*** Egypt's GASC bought a total of 295 TMT of Ukraine and Russian wheat. The total included 180 TMT of Russian wheat and 115 TMT of Ukraine origin. Russian wheat prices ranged from $220.42/mt up to $222.20/mt CIF. Ukraine wheat was priced at $222.15/mt and $222.61/mt CIF.
*** Jordan bought 60 TMT of wheat. Five firms participated, however no price had been given.
*** Bangladesh is in for 50 TMT of opt origin milling grade wheat. The lowest offer was said to be $255.46/mt CIF. No purchase has been finalized yet. Other offers ranged from $256.33/mt up to $269.74/mt.
*** Oct 10 Japan is in for 114,012 mt of Canadian and US wheat. The total includes 53,960 mt of Canadian red spring, 24,533 mt of US DNS wheat, 24,014 mt of US white wheat and 11,505 mt of US HRW wheat.
*** Oct 22 Jordan back in for 120 TNT of wheat.
*** Oct 23 Ethiopia is in for 400 TMT of milling wheat.
*** Oct 29 Ethiopia is in for 200 TMT of milling wheat.
*** Nov 4 Syria for 150 TMT Russian wheat.
*** Syria continues to work a swap of 100 TMT durum for 100 TMT of milling hard wheat. Offers have to be good to Oct 28.
*** Columbia for wheat.