Afternoon wheat commentary: KC/Chicago spread into new recent highs
Wheat took a back seat to the rest of the grain complex today as strong gains across the soy complex set the early tone, and both soy and corn ending strong provided the finishing touches. Wheat was not without its moments, however, with HRW futures finishing between six and seven cents higher, and Spring wheat futures keeping pace with KC all day before also finishing with six to seven-cent gains. Chicago was the laggard, but still finished with three to four-cent gains. Strong support in the KC/Chicago spread looked to be behind much of today's price action in wheat as the spread finally broke out of its six-week trading range.
There has been plenty of demand around this week, but the story for wheat this morning had to have been the GASC tender and seeing someone other than Russia or Ukraine on the list of offers. Today it happened to be Poland, a country rarely seen competing for GASC business. Just seeing another country on the list of offers should probably be enough to start slowing down the accelerating rise of World prices. Still, if you took that Polish offer in the GASC tender out of the equation, the next low offer would have been ten dollars above the low offer from a couple weeks ago, and that had to give the wheat complex a little spark today as well. The wheat market seems to be struggling to find its way, and right now is relegated to being a following market. The KC/Chicago spread finally broke out of its recent range, and it did it on a higher board, which was a little surprising to me. Regardless, today's settle in the spread is the highest in more than two months, and if we can get a second close above 68 ¼ tomorrow, it should be enough to spark a further rally and possible test of the 50-cent level.
Export sales will be out in the morning. There did not seem to be much in the way of wheat business last week, and it was a Holiday-shortened week. Even Japan and their usual weekly tender took the week off. There were some hints that we may have been getting some business done but nothing was ever confirmed so I am expecting just the usual participants. Look for between 400 and 500 TMT.
HRW basis bids were mixed on Wednesday. Bids for 11-pro remained +108/118, as did the 11 ½-pro, the 12-pro remained +119/+129, the 12 ½-pro stayed +119/129 and the 13-pro was down five to +125/135. HRW wheat export bids were also mixed on Wednesday. In Sept, ORD was up three to +137, 11-pro was up two to +149 and the 12-pro was down five to +154. For O/N/D, ORD firmed three to +145, the 11-pro was down one to +156 and 12-pro stayed +165. SRW wheat track bids down to the Gulf was unchanged on Wednesday. Sept stayed 35/50, Oct remained 45/47 and Nov remained 55/63. HRW wheat track bids to the Gulf were mixed. Sept was down one to 159/169, Oct was up one to 169/179 and Nov was up one to 169/179.
After Tuesday's close the GASC announced they were in for wheat, this time for shipment between Nov 10 thru Nov 20. The lowest FOB offer this morning was a cargo of Polish wheat at $228.43/mt. That was a little more than three dollars above the lowest FOB offer from the previous tender back on Sept 3. The next five lowest FOB offers were all Russian, starting at $234.99/mt, up to $243.00/mt. Those offers started at roughly ten dollars higher than their offers from a couple weeks ago. The GASC ended up buying four cargoes (235 TMT), of which one was Polish and three were Russian. The average price paid was $249.38, which is $8.88/mt more expensive than what they paid in their prior tender. It could have been worse, as freight cost was down from Sept 3. Freight for Russian was $13.25 on two, and $14.84 on one, making it 66 cents to $1.25 cheaper than the freight paid on Sept 3. Polish freight was $20.80.
Algeria finally changed their wheat import terms to allow Black Sea origins (Russia and Ukraine) to be offered. Russia has been trying to get Algeria to try and change its spec for some time now, so this announcement should not come as a huge shock to anyone. Russia previously negotiated something similar with the Saudi's and now have access to that market as well. This is a major blow to the French as they have been the main supplier of wheat to Algeria for years. It is expected that the change in specs will be higher protein requirements, and an increase in insect damage from 0.1% up to 0.5%. It was this increase that allows Russia entry to the Algerian market. These changes are expected to take effect in Algeria's next tender. Although the poor French wheat crop may make it less painful this year as France is expected to ship less than ½ of what they normally ship to Algeria, it is a disappointing day for French wheat.
Russia's Ag Ministry data shows that as of Sept 15, the country has harvested 114.8 MMT of grain, which includes 82.0 MMT of wheat.
France AgriMer lowered their 2020/21 marketing year wheat ending stocks by 100 TMT down to 2.9 MMT. They cut their 20/21 soft wheat exports outside the EU by 1.15 MMT down to 6.6 MMT and lowered their 19/20 soft wheat export forecast outside the EU by 100 TMT down to 13.5 MMT. They also said that thus far, French soft wheat protein content is averaging 11.6%.
APK-Inform said Ukrainian wheat production will be 25.5 MMT.
A Farm Futures magazine survey pegged Winter wheat planting intentions up more than 2% from last year to around 31.3 mil acres.
Export business this week:
*** Jordan bought 120 TMT of wheat in a tender that closed today. There were only two offers, and no price has been given yet.
*** South Korea's SPC is in for 38 TMT of Canadian or US origin wheat.
*** Turkey is said to have bought roughly 440 TMT of mostly Black Sea origin wheat. The lowest offer had been $240.49/mt for around 60 TMT.
*** The lowest offer in Pakistan's opt origin wheat tender was said to be $274/mt. Other offers ranged between $274.36/mt up to $277/mt.
*** Russia's embassy in North Korea said 50 TMT of Russian wheat was delivered to the communist regime as humanitarian aid.
*** Over the weekend Saudi Arabia's (SAGO) purchased 745 TMT of wheat in their latest purchase tender. The avg price for 685 TMT of the 12.5% pro wheat was $251.13/mt CIF, and 60 TMT of the 11.5% pro wheat was priced at $245.37/mt CIF.
*** Sept 17 Japan is back in for their usual weekly tender. They are seeking 104,870 mt of Aussie, Canadian and US origin wheat. The total includes 22,685 mt of Aussie white, 25,420 mt of Canadian red, 27,030 mt of US DNS, 16,405 mt of US white, and 13,330 mt of US HRW.
*** Sept 30 Ethiopia is seeking 80 TMT of milling wheat.
*** Oct 13 Ethiopia is back in for 400 TMT of opt origin wheat.