Wheat morning update and commentary: A slightly better start to the day
News headlines of Europe's smaller wheat crop expected for this coming year is trying to give the wheat complex a little boost this morning. Overnight trade saw mostly flat to slightly lower price action through the early morning hours, but shortly after the European markets opened, we saw Matif wheat futures rally a little more than one Euro, and this helped rally futures here in the US. SRW wheat futures traded out to almost four cents higher, and KC rallied to almost three cents higher. But as the Matif rally stalled out, so did our rally here in the US - that is until a couple minutes before the night session ended. It looked as if someone bought several hundred contracts of Chicago wheat in the final few minutes of the night, and it helped the wheat complex finish right up near their evening's highs. Chicago finished almost four cents higher, and KC and Mpls each finished around two cents higher. Don't be fooled by this late surge. The wheat complex will need additional positive influences if trade wants to extend the rally as we move into the day session.
Yesterday, the bull spreads in Chicago was one of the few bright spots for the wheat complex, but during the day session even those gains did not 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 considering 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 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.
As we look ahead to the rest of the day, the funds are still long wheat - this afternoon we will get an updated CFTC report to see just how long they still remain, and technically the charts continue to be negative, which has only led to more of the length in the market to unwind this week. The US will enjoy a long three-day Holiday weekend this weekend, and with Matif wheat futures trading around one Euro higher we may not see that fund selling initially this morning. That does not mean the rally can carry very far. Look for selling to start to develop between 5.50 and 5.55 basis Chicago March - if trade is even able to muster that much of a rally. Doubt trade can carry above that area unless something new develops. Do not be surprised if the overnight gains struggle to hold today - especially if the US Dollar continues to firm.
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.
France AgriMer data said that as of Feb 10, soft wheat conditions were 65 pct G&E. Although this is unchanged week over week, conditions are down from where they were at in December (73 pct G&E), and much below levels where they were at this time last year (85 pct G&E). Keep in mind earlier this week, France's farm ministry lowered their projected planting area by more than 5 pct year over year to 4.7 mil hectares.
Informa kept their expected 2020 US total wheat acres estimate unchanged at 45.529 MMT. The total includes 30.804 mil acres of winter wheat and 13.280 mil acres of spring wheat.
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.
Export business this week:
*** On Thursday, 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.