Afternoon wheat commentary: Markets unable to hold on to early gains

All three classes of wheat saw a slightly better start to the evening, but the higher price action was not very lasting, and by the early morning hours all three classes of wheat had already fallen to between five and eight cents lower. Futures had fallen further by the time the European markets had opened, but shortly thereafter trade rallied thirty cents. Although the highs of the day were made during this move, the markets were able to hold much of this rally until the morning pause. Both Chicago and KC saw back and forth type price action through the rest of the morning, but Mpls futures gradually weakened throughout the day. In fact, by late in the session Mpls had fallen back down to their overnight lows, and this seemed to weigh on SRW and HRW futures a bit, as late in the day those markets started to break down too. Ultimately, Mpls Sept finished with 12-cent losses, while Chicago Sept finished marginally higher, and KC Sept marginally lower and all three markets settled well off their intraday highs.

There were a couple headlines around trade today definitely worth talking about. The first, and more concerning was another Russian missile attack on another Ukrainian export facility, this time in the country's southern port city of Mykolaiv. Turkey and Russia can talk and say all they want about humanitarian corridors or safe passages of grain exports out of Ukraine, but as long as Russia continues to bomb grain facilities, who is actually going to take either country serious? Although this may have been one supportive influence for wheat today, still think what we talked about after Tuesday's beatdown - US values compared to EU vales falling to their lowest levels since early March played more of a key role in price action today as it sure looked as if we saw some bargain hunting, and hopefully we saw some US export demand surface as well. Overall Global demand has picked up this week, with Algeria's large tender yesterday, Tunisia picking up some wheat today, Japan in tomorrow and Bangladesh with two open tenders over the next week. Demand is always a good thing.

It was interesting that the other headline I was referencing to in the above paragraph has not received as much press as I thought it should. And that is Goldman Sachs lowering their three, six, and twelve-month outlooks for wheat prices to $10.00, $10.25, and $11.00/bu, respectively. This compares to their prior outlook of $10.21, $10.36, and $10.49. In fact, Goldman lowered their corn and bean price outlook as well. Goldman is not as huge as they once were, but they still have a presence around trade. Couple things to point out here. First, these projections were most likely given to their own customers Tuesday morning, and only made to the public today. Three months out brings us to September, and whether one wants to look at September futures or December futures, the fact is late last week both months were trading around $11.00. It just so happens that the market breaks $1.00 around the time Goldman is lowering their price projections. Granted, wheat is going through a rapid harvest, and we have seen some selling there, and technically, the market broke through some support areas which probably triggered sell stops but at least one can tie another potential influence in the Fri-Tues break of over $1.00.

Headline news:
USDA weekly export sales will be delayed until Friday this week because of Monday's Federal Holiday.

Export business around this week:
*** Tunisia bought 100 TMT of wheat today (had been in for only 75 TMT), yet no prices had thus far been given.
*** Algeria's OAIC bought upwards of 660 TMT of opt origin milling wheat. They were in for two shipping periods (Aug 1 thru 15 and Aug 16 thru 31), so expectations were for a large purchase. Prices were thought to be around $445/mt C&F and of mostly European origin.
*** Jordan made no purchase in their 120 TMT milling wheat tender.
*** June 23 Japan is in for 168,330 mt of Aussie, Canadian and US wheat. The total includes 45,430 mt of Aussie white, 63,820 mt of Canadian red, 24,250 mt of US DNS, 22,010 mt of US white and 12,820 mt of US HRW wheat.
*** July 1 Pakistan issued a tender for 500 TMT of milling wheat.
*** July 5 Bangladesh is in for 50 TMT of milling wheat to replenish reserves.
*** Bangladesh is also seeking 200 TMT of Russian wheat in a gov't to gov't deal following India's ban on exports, but concede that Western sanctions may make paying for the grain challenging.