Wheat morning update and commentary: A slightly lower start to the day
The first fifteen minutes of the night kind of set the tone for the type of price action we would see throughout the evening in wheat. Both Chicago and KC started a little better but quickly fell to three to four cents lower, and for Chicago, that two-sided type trade would resonate throughout the night. But KC and Mpls would not be as fortunate and futures remained lower over the balance of the evening. Despite trading in only a ten-cent range we saw several five to seven cent moves, especially in Chicago, where trade went from around three cents higher shortly before the European markets opened, to seven cents lower through the first few hours of the European trade, all the way back to unchanged by the morning break. All three classes of wheat finished the night a little lower despite strong gains in soy and modest gains in corn.
That is a bit of a red flag as we move into the day session. Last week we twice saw the markets unbale to capitalize after a strong day and finish the following session lower. Why is this trend so prevalent? Part of the reason is technically. Chicago wheat continues to find itself in a range pattern (between $6.30 and $6.70), and Monday's move only took trade towards the upper end of that range. The same can be said for KC, as over the past several weeks HRW futures have mostly stayed in a $6.10 to $6.50 trading range, and yesterday's strong price action only took futures back into its upper end of that range. Weather has been an influence, giving trade that initial spark, but other news is very limited. Felt yesterday's price action was more demand related than anything else, but we rarely see any sales announcements in wheat, and with the potential of any business getting done taking place on a Monday, it will not be until a week from Thursday before we see any confirmation.
It is disappointing to see the markets struggle to put together back-to-back solid performances, but if nothing else, the strength in corn and soy should keep the wheat complex from falling apart today. The concern is that what happens if corn and soy are unable to extend their evening's gains, or hold them?
The USDA released some state-by-state Winter wheat condition reports after Monday's close.
Illinois conditions were 46% G&E and 3% P&VP vs 65% G&E and 11% P&VP last month.
Colorado conditions were 19% G&E and 29% P&VP vs 17% G&E and 36% P&VP last month.
Kansas conditions were 40% G&E and 26% P&VP vs 43% G&E and 24% P&VP last month.
Nebraska conditions were 34% G&E and 22% P&VP vs 34% G&E and 18% P&VP last month.
Oklahoma conditions were 48% G&E and 14% P&VP vs 61% G&E and 5% P&VP last month.
No Dakota conditions were 16% G&E and 33% P&VP vs 21% G&E and 19% P&VP last month.
So Dakota conditions were 41% G&E and 16% P&VP vs 32% G&E and 21% P&VP last month.
Montana conditions were 69% G&E and 11% P&VP vs 68% G&E and 5% P&VP last month.
Texas conditions were 30% G&E and 31% P&VP vs 31% G&E and 8% P&VP last month. Texas has already started their weekly reports, with 22% of the crop headed vs 18% last week, 22% last year and the 5-year avg of 5%.
HRW basis bids weakened a little for the high pro's on Monday but saw little change elsewhere. Bids for 11-pro stayed +110/120, the 11 ½-pro stayed +125/135, the 12-pro stayed +125/+135, the 12 ½-pro remained +125/135, and the 13-pro was off five to +120/130. HRW wheat export bids saw little change on Monday. In Feb, ORD stayed +123, the 11-pro remained +127, and the 12-pro stayed +148. For Mar, ORD stayed +124, the 11-pro stayed +128, and the 12-pro fell two to +150. For A/M, ORD stayed +124, the 11-pro remained +127, and the 12-pro fell one to +150. SRW wheat track bids down to the Gulf saw no change to start the week. Feb and March both remained 105/120 and April stayed 100/115. HRW wheat track bids down to the Gulf saw little change on Monday. Feb remained 148/158, March stayed 152/162, and April was down one to 151/161.
Wheat shipments Monday morning came in at 325 TMT vs an adjusted 419 TMT last week (an increase of 26 TMT from the week prior) and 437 TMT this time last year. The breakdown was: 27 TMT of HRS, 81 TMT of HRW, 10 TMT of SRW, 181 TMT White and 26 TMT of durum. Current market year to date is 17.758 MMT vs 18.157 MMT this time last year. The biggest addition from last week was a 10,578 mt HRW vessel to Mexico. This week, one cargo of White was shipped out to China from the PNW, one cargo each was also shipped off to Nigeria and Peru, and smaller vessels went out to Mexico, Yemen, Vietnam, Japan, Chile, and Italy.
EU data shows in the week ending Feb 21, soft wheat exports were 18 TMT, bringing the season to date total to 16.590 MMT vs 20.341 MMT this time last year.
Export business this week:
*** Saudi Arabia's SAGO said they have entered into agreements with Saudi owned farms in Australia, Canada, and the Ukraine to import 355 TMT of wheat. The avg price per ton was $330.04/mt.
*** Feb 24 Jordan is back in for 120 TMT of opt origin milling wheat.
*** Feb 25 Japan is in for 57,331 mt of Aussie wheat. Shipment is expected in May.
*** March 2 Pakistan is in for 300 TMT of wheat.
*** Syria's gov't is in for 200 TMT of soft wheat.