Afternoon wheat commentary: SRW wheat bull spreads in control
Overnight, SRW wheat bull spreads was the story as the May/July moved past ten over, something not seen since August of 2018 (HRW and Spring wheat spreads did not firm). What was interesting was that volume in the spreads overnight was a little more active than usual, but not egregiously so, but there were roughly 1,500 spreads that traded at ten or higher, meaning someone wanted to be long up-front wheat. Commented this morning if the strength in the spreads was going to continue during the day it was going to benefit the entire wheat complex, and boy did it ever.
Chicago May/July surged past 13 over, and the ripple down effect saw the KC/Chicago spread - basis the May, lose eight cents. The May/wheat/May corn spread went ballistic, rallying more than 17 cents and trading to levels not seen since Dec 2014. We also mentioned this morning that when we usually see the spreads have that much influence during the night, it carries over into the day. Look for an active day in many of the wheat spreads. So, what does that mean for tomorrow? It is hard to say. We saw huge call buying today, meaning vol was not only pumped up, but there are many thinking there is going to be more to this rally. After such a strong move already this week, it would be only natural to see the markets set back some, but until the fear and uncertainty subsides, look for buying on any 10 to 15-cent break.
There was plenty of news around the wheat complex overnight and today. Kazakhstan has suspended exports of wheat flour (along some others) until at least April 15 in an attempt they ensure their domestic supply during the coronavirus epidemic. Earlier this week we talked about Russia moving to weekly meetings as to assess its situation, and we also already know about work stoppage ideas in various Argentine and Brazil ports which have been talked about in recent days. And, the Iraqi trade ministry has let its government know it needs funds to purchase 1.0 MMT of wheat and 250 TMT of rice to help ensure sufficient stockpiles for its food rationing program. Combine everything together and it is no wonder why we are seeing front-loading buying by end users. This strong up-front rally (Chicago May finished more than 18 cents higher today and is already more than 40 cents higher this week) partly comes as the result of just a few moves. Imagine what could happen if this becomes more pronounced?
HRW basis on Wednesday was unchanged to a little softer. Bids for 11 pro remain +133/+143, the 11.5 pro remain +143/+153, but the 12 pro was down three to +152/162 and the 12½ pro remained +160/+170. HRW wheat export bids saw only minor changes. For March, ORD remains +125, the 11 pro +141, and the 12 pro +160. For April/May, ORD was up three to +129, the 11 pro remained +141, and 12 pro +160. For June/July, ORD remains +121, the 11 pro +138 and 12 pro +155. SRW wheat basis bids at the Gulf recouped some of what they lost yesterday. March is now 75/85 (up five), April is now 75/85 (up 5/unch) and May remains 80/90. HRW wheat bids saw no change with March, April and May all remaining 155/161.
Export sales will be out in the morning. If all the sales hit, we may have a marketing year high tomorrow. Even if not, sales should surpass the last two weeks which came in at roughly 480 TMT combined. Mexico held top honors last week taking 103 TMT, but China should hold those honors tomorrow. Besides China, look for South Korea, Japan and maybe even Algeria (Durum), along with the usual destinations such as Philippines, Taiwan, Mexico and Thailand. Look for between 700 and 900 TMT.
In Algeria's tender that closed Tuesday, the OAIC bought roughly 240 TMT of opt-origin milling wheat. This is much smaller than purchases in the past, mostly because the coronavirus epidemic has caused logistical issues in France - where Algeria usually buys its wheat from. Despite the lockdown measures in France, it is thought that most of the wheat Algeria purchased was French wheat.
The Iraqi trade ministry has let its government know it needs funds to purchase 1.0 MMT of wheat and 250 TMT of rice to help ensure sufficient stockpiles for its food rationing program.
Chinese importers tell USDA officials that they are getting tariff relief for purchases of US agriculture and food goods.
Export business this week:
*** Algeria is said to have bought around 240 TMT of wheat, paying between $242.50 and $243.00/mt C&F. Last week Algeria bought 400 TMT of durum wheat. On March 12 they bought 680 TMT of milling grade, paying between $226 to $227/mt CIF.
*** March 23 Syria is back in for 200 TMT of Russian wheat. This is the fourth time Syria has been in for Russian wheat, with the previous three times resulting in no purchase.
*** March 27 Taiwan is in for 99,450 mt of US milling wheat.
*** April 1 Ethiopia is in for 200 TMT of milling wheat.
*** April 7 Ethiopia issued another international tender, this time for 400 TMT of milling wheat.
*** Philippines looking for wheat for April.