Afternoon wheat: Strong export sales data unable to keep funds from shedding more length
Overnight, the bull spreads in Chicago was one of the few bright spots for the wheat complex, but as trade moved into the day session even those gains were unable to hold very well. The calendar spreads in Chicago did end up finishing a little stronger, which that in itself may have been a bigger accomplishment than I am giving it credit for since it was able to settle a couple ticks higher despite the lower flat price finish. Chicago ended the day between three and four cents lower, while KC and Mpls settled between four and five cents lower. The funds are still long wheat, and technically, the charts have turned this week which has led to more of the length in the market to unwind. The concern as we head into Friday's trade is that KC March had a lower low and a lower high vs Wednesday's trading range, and Mpls March settled at its lowest level since Dec 13. Over the past couple of days, we have mentioned that typically, in weeks where markets finish lower on both Monday and Tuesday, trade does not usually bode very well come Friday afternoon. As of now, SRW wheat futures are 14 cents lower on the week, Spring wheat futures are nine cents lower on the week, and KC futures are 6 ½ cents lower on the week.
The better than expected export sales report this morning may have given futures a little boost leading up to the morning pause, but as mentioned this morning, did not think the export sales data was going to carry over into the day session. The funds are still long wheat, and technically, the charts continue to be negative, which has only led to more of the length in the market to unwind. With limited fresh, influential news around, see no reason for that trend to change much as we head into a long three-day Holiday weekend.
HRW basis saw little change from Wednesday. Bids for 11 pro remain +90/+100, the 11.5 pro remains +98/+108, the 12 to 12 ½ pro remains +130/+140, and the 13 to 13.5 pro is +185/+195. Export bids also saw little change. For Feb, ORD remained +120, the 11 pro is now at +135 (up one), and the 11 pro remains +155. For March, ORD remained +127, the 11 pro stayed at +137, and the 12 pro remains +160. For April/May, ORD was unchanged at +129, the 11 pro is still +138 and the 12 pro remains +160. SRW wheat bids at the Gulf saw little change. Feb is 105/112 and March remains 105/115, but April firmed to 110/118 (up 5 / up 8). HRW wheat bids were unchanged. Feb remains 172/177, March 173/178 and April 170/175.
Export sales this morning was a pleasant surprise, coming in at 643 TMT with an additional 44 TMT of new crop for combined sales of 687 TMT. The breakdown this week included 294 TMT of HRW, 12 TMT of SRW, 198 TMT of HRS, 132 TMT of White and 7 TMT of Durum. Nigeria held top honors this week taking 131 TMT (mostly hard). The Philippines were right behind them taking 105 TMT of old (split between Spring, White and Hard) and 24 TMT of new (all Spring). Korea, Vietnam, Mexico, Japan and the Dom Rep were also notable buyers.
Strategie Grains lowered their 2020 EU soft wheat production forecast by 1.2 MMT down to 138.6 MMT. They also pegged Russia's 2020 harvest at 82 MMT, but they cautioned that weather conditions could change that outlook in the coming months. The group also raised its outlook for EU soft wheat exports in the current 2019/20 season by 100 TMT up to 30.6 MMT but added that exports in 20/21 are expected to drop to 26.2 MMT on expected smaller supply.
USDA under-secretary for trade said China has not informed the US government of any delays or reductions to planned purchases of US agriculture goods hashed out under the first phase trade pact.
Export business this week:
*** Japan bought 110,565 mt of Aussie, Canadian and US wheat. The total included 27 TMT of Aussie, 49,375 mt of Canadian, 18,945 mt of US HRW and 15,245 mt of US DNS.
*** On Tuesday, the GASC bought 360 TMT of wheat, of which three cargoes were Russian and three Romanian. The avg price was $239.47/mt C&F. The grain was for March 21-31 shipment.
*** Also Tuesday, Algeria bought upwards of 680 TMT of wheat (probably mostly French). This is an even larger than normal purchase for them, but they were in for two shipping periods. The price allegedly paid was between $237.50 and $237.75/mt CIF. In their prior tender (Jan 22), they bought around 400 TMT at $245/mt CIF.
*** Jordan ended up buying 60 TMT of milling wheat in their tender that closed Tuesday, paying $224/mt C&F. There were three firms that participated in the tender.
*** Feb 17 Syria is back in for 200 TMT of Russian wheat. This is the third time Syria has been in for Russian wheat, with the previous two times resulting in no purchase.
*** Feb 18 Turkey's state grain board TMO has issued a series of international tenders to purchase a total of around 250 TMT of wheat and 50 TMT of durum.
*** Feb 18 Jordan back in for 120 TMT of opt origin hard wheat.
*** Iran looking for wheat for March.
*** Philippines looking for wheat for April.