Afternoon wheat: An extremely disappointing finish for both Chicago and KC wheat futures today

It was an extremely disappointing finish for both Chicago and KC wheat futures today following two separate reversal type moves, eventually culminating in a late sell-off that saw the overnight lows violated in both classes of wheat before ending the day just a few ticks off those lows. SRW wheat finished the poorest at more than a nickel lower, while HRW wheat finished around four cents lower. Mpls wheat futures seemed immune to much of the overnight weakness, and although trade did give back its early gains throughout the day session, it did not trade as poorly as either the HRW or SRW markets during the latter half of the day. Instead, trade mostly stayed between unchanged and a couple cents higher before finishing a penny better.

To say the wheat complex had an up and down trading session today may be a bit of an understatement. Overnight price action picked up where the markets left off on Monday and traded defensively during the early stages. For Chicago, trade quickly fell to around four cents lower before stabilizing around the 5.20 level. For KC, that level was 4.21. Shortly before the European markets opened the entire grain complex started to firm, and wheat followed. In roughly a two-hour window, values rallied ten cents and trade remained in the upper end of the trading range over the final few hours of the night. China headlined the news stories overnight, as talk surfaced that China may be back around for US beans again after a 10 MMT duty free TRQ was supposedly issued to crushers this morning. US beans with no duty are extremely competitive through January. This brought optimism back into the entire grain complex. We mentioned yesterday that for wheat, we did not think it would not take much to re-invigorate trade as the markets were still under the umbrella of feeling pretty good about themselves after the plethora of tenders ignited a rise of World values over the past several weeks - with China possibly being a part of such business. But we also warned this morning that many times over the past 18 months that positive China news headlines such as the one mentioned overnight has had a tendency of not being able to carry that momentum throughout the entire day, so the hardest part of the day was yet to come. We thought it was especially important today for the wheat complex to try and sustain that positive vibe. The markets did not necessarily have to close on the highs - just avoid a meltdown. Both Chicago and KC failed miserably, as values gradually weakened throughout the morning, stabilized a bit near the overnight lows late in the day, but then violated those lows with one late sell-off into the close and finished right off its session's lows.

Going home Monday night we mentioned that after 30-cent gains over the past two weeks in KC, and 40-cent gains in Chicago, a technical correction was not the worst thing for a market. Often it is a healthy reaction. That being said, we felt that today's trade was going to be important in that many times when trade settles lower on both Monday and Tuesday the markets tend to struggle all week (which one would figure will now only be enhanced after a strong upside reversal failed). Don't look for the GASC to bail out the markets this week and announce another tender. Algeria will mostly look to France for the majority of their tender that is slated to close today. Both Ethiopia and Jordan postponed and cancelled their tenders slated to close today. Turkey will buy some EU wheat and Tunisia may pick up a little wheat, but that could be it for a while. Meaning, by the end of the week don't be surprised if we see World wheat values finally start to move lower. Meaning a test of last week's lows might be right on the horizon. That is 4.17 ½ in KC Dec and 5.04 ½ in Chicago Dec. A settle below last week's lows opens the door for another run at 4.95 in Chicago Dec and 4.00 in KC Dec. With Chicago having more room to the downside than KC, don't be surprised if we see the KC/Chicago spread firm over the balance of the week. The spread has tested its contract lows in each of the past two days and held.

Headline news:
Ukraine's Ag Ministry said wheat harvest is expected to rise to around 28.1 MMT vs 24.6 MMT last year. Harvest is roughly 85 pct complete. However, not all news is good as they also said that plantings of winter grains could be lower this year due to poor fall weather.

Export business this week:
*** Turkey provisionally bought 190 TMT of EU red milling wheat for shipment between Nov 29 and Dec 17. The lowest offer was $228.10/mt C&F, and prices ranged up to $234.00/mt.
*** Ethiopia postponed their 400 TMT milling wheat tender that was slated to close Wednesday out to Nov 5.
*** Jordan did not make a purchase in their 120 TMT wheat tender that closed today. Four firms participated with offers.
*** Saudi Arabia's state grain buyer SAGO acknowledged that over the weekend they had bought 605 TMT of opt origin wheat at an average price of $242.51/mt.
*** Oct 22 Algeria said they are in for 50 TMT of opt origin wheat (they usually buy much more).
*** Oct 23 Tunisia is in for 50 TMT of opt origin milling wheat.
*** Oct 23 Turkey is in for 127,500 mt of EU origin durum wheat. The grain is for shipment between Nov 29 to Dec 17
*** Oct 29 Ethiopia is in for 200 TMT of milling wheat.
*** Oct 30 Bangladesh is in for 50 TMT of opt origin milling grade 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.