Afternoon wheat commentary: An up and down week across the wheat complex
The opening hour of the night session saw the markets battle both sides of unchanged, but soon thereafter trade started to firm, and futures remained higher until the end of the night when trade (at least in KC and Chicago) turned two-sided again. Mpls stayed strong through the morning break and ultimately finished the night with double-digit gains. But for HRW and SRW futures, both the overnight highs and lows were made during the final few hours of the evening, which made for an uncertain start to the day. That answer was made almost immediately as early buying quickly rallied the markets to double-digit gains, and the trade never really looked back. All three classes of wheat topped out at around 25 cents higher midday, with Chicago and Mpls holding their gains a little better than KC over the final few hours of the day. Ultimately, Chicago finished the day around 14 cents higher, Mpls around 13 cents higher, and KC only around 7 cents higher. For the week, Chicago lost roughly 11 cents, KC lost around 17 cents and Mpls gained more than 25 cents.
It was a week which had something for both the bull and bear. Condition reports showed the Winter wheat crop improving a little, but Spring wheat planting still lagging. There was the story of the China-Brazil corn export deal, which seemed to rattle most grain markets. Then there were reports on back-to-back days of Russia possibly opening a humanitarian corridor out of a couple of Ukrainian ports to possibly deliver some grain. The news wires really tried to push that story hard mid-week, but the wheat complex would have none of it. Granted, futures traded weaker during the night session, but that is when the volume of trade is the lowest, and its much easier to push trade in a certain direction. Over the past few sessions, we would see the markets rebound during the day when trade is much more active. Before finishing the week on a more positive note - led by Mpls. The northern plains saw much better weather over the past few days, but that is once again expected to take a turn for the worse later this weekend and into early next week when more showers and storms are expected to move through. This could have possibly been behind the strength in Mpls as we closed out the week. It goes without saying that demand for US wheat has been awful of late, but the correction off last week's highs should have helped some. Today's settle in Chicago is $1.25 off last week's highs, and in KC, it is $1.45 off last week's highs. More importantly, the relationship between US and European values have come in a little, something that absolutely needed to be done as at the beginning of last week we saw US prices race well above European wheat values.
The commitment of trader's report this afternoon was expected to show that the large spec was sellers of around 20,000 contracts of Chicago wheat during the week ending May 24. What the data showed was that they were buyers of 494 contracts, which at the time, lowered their net short position to 31,578 contracts. In KC, funds were buyers of 50 contracts, which at the time, increased their net long position to 12,371 contracts. Managed money was sellers of 4,331 contracts of Chicago wheat, which at the time, lowered their net long position to 22,254 contracts. In KC, managed sold 2,244 contracts, which at the time, lowered their net long position to 44,546 contracts. In Spring wheat, managed money sold 2,943 contracts, which at the time, lowered their net long position to 15,231 contracts.
A reminder that Monday is Memorial Day. The grain markets will be closed Sunday night and Monday during the day, re-opening Monday night at its usual time of 7:00 pm CDT.
Ukraine's Agribusiness Club (UCAB) projects the country's wheat production to fall by 44% to 18 MMT. They project corn production falling 39% to 25.7 MMT. They project barley production falling 55% to 5.2 MMT. They project oilseed and legume output to fall by 37% to 66 MMT. Despite the major reductions, the group said the harvest will be enough to cover the entire country's domestic needs, and still export some grain.
Russia's Ag Minister estimates the country will have around 50.0 MMT of grain for export in the upcoming July 2022 thru June 2023 marketing year. This compares to 37 MMT this year.
Putin and Italy's Prime Minister Mario Draghi discussed ways to help ease the international food crisis, with the Kremlin saying this could be done only if the West lifts sanctions. The White House followed that up by saying there were no talks being held about relaxing sanctions on Russia in order to get grain exports.
Coceral raised their EU soft wheat production estimate for this season by 1.7 MMT to 143.0 MMT. Last season's production was 143.9 MMT.
France AgriMer pegged soft wheat conditions at 69% G&E, down 4% week over week. They pegged Durum wheat conditions at 67% G&E, which is down 6% week over week.
Russia's Ag Ministry set its wheat export tax for the week ending June 7 at $121.20/mt, up from its current $110.50/mt.
Export business around this week:
*** South Korean Flour Mills bought 124,700 mt of Aussie, Canadian and US wheat. The total included 50 TMT of Aussie white, 33,080 mt of Canadian red spring, and 41,620 mt of US soft white wheat.
*** Egypt's Trade Ministry said they would accept imported wheat moisture levels up to 14% (currently 13.5%).
*** Iran and Russia are finalizing an agreement for Russia to supply Iran with 5.0 MMT of wheat or grain.
*** Oman based Salalah Mills said they have purchased a total of 180 TMT of wheat from Australia and India, adding the volume is enough to cover the country's consumption through the end of 2022.
*** The lowest offer in Pakistan's 500 TMT tender is thought to be $515.49/mt C&F. No purchase has been finalized yet.
*** Jordan made no purchase in their 120 TMT wheat tender.
*** Saudi state grain buyer said they have purchased 89,290 mt of domestically farmed wheat so far this season.
*** Bangladesh is in for 50 TMT of milling wheat. Only one firm has thus far given an offer.