Afternoon wheat commentary: Chicago and KC bounce, but Mpls extends its losses
It was one of those rare days for SRW futures, with trade starting the evening a little better, extending gains through the night, and remaining higher through the entire day session - although trade did set back a little over the latter half of the day. Still, Chicago finished the day with double-digit gains. Both KC and Mpls saw mixed price action during the opening hour of the night, but in the case of HRW futures, trade followed Chicago in that futures eventually firmed through the night and early morning hours, set back a little over the latter half of the day session and still managed to post double-digit gains. Mpls tried to follow, but overnight gains were not nearly as strong as HRW and SRW, and when the wheat complex set back over the final few hours of the day, Spring wheat futures moved lower, and ultimately settled with modest losses. The influences surrounding Mpls is a little different than KC and Chicago in that Mpls is in the middle of its growing season, and the forecast is calling for plenty of chances of rain. Trade is under the assumption we are going to see a reduction in Spring wheat planted acres this coming Thursday morning as the planting season did not go as planned, but the current weather forecasts look to be trying to make up for some of its misgivings during planting season.
As for Chicago and KC, one bounce day after a more than $1.75 break does not mean the break is over. Most would probably say it is a normal reaction from oversold conditions. Can the markets be in the early stages of a bottoming period, sure, the lower board has sparked plenty of Global demand. But outside of speculation the Algerian purchase last week may have been a little larger than initially reported and the GASC announcing a new tender, most other business is known to the market. It also does not help that despite today's strong price action in HRW and SRW, neither market was able to get above Monday's highs, so technically, today was only an inside day on the chart. Going forward, a settle outside of Monday's trading range should spur on additional buying/selling, depending on which direction the market is moving. And keep in mind, tomorrow is position day, and the day before first notice usually tends to be negative to trade. There will be no limits in July grain futures starting tomorrow. The one saving grace is that Thursday is also crop report day, and after such a steep break, we may see some position squaring ahead of the reports.
First notice on July grain futures is Thursday, meaning longs will need to be out by Wednesday's close to avoid delivery risk. As of this morning, the CME showed registrations of 0 corn, 0 beans, 0 meal, 98 oil, 1,010 SRW, and 66 HRW receipts.
The GASC is back in for wheat, with offers remaining valid until June 29. The last time the GASC was in for wheat was around four weeks ago, and they picked up 465 TMT, which included four cargoes of Romanian, three cargoes of Russian, and one cargo of Bulgarian. Prices were thought to have averaged around $480/mt C&F. The low offer was a cargo of Russian at $438.86/mt FOB. Prices have come down substantially since June 1, so look for offers to start around ten dollars lower than the prior tender.
Russia could have as much as 41 MMT of wheat available for export in the 2022/23 marketing year. That is up 25% from the current year. The 2022 Russian wheat crop harvest is seen at 86.9 MMT, up 14% over the previous season.
Iraq's Trade Ministry said they have procured more than 2.0 MMT of domestic wheat from the current harvest. The ministry est the country needs around 3.0 MMT of wheat for reserves.
EU data shows that in the week ending June 26, cumulative marketing year soft wheat exports have reached 27.14 MMT compared to 26.68 last week and 25.60 MMT this time last year.
Export business around this week:
*** Egypt's GASC is back in for wheat.
*** Traders now estimate last week's wheat tender purchase by Algeria at 740 TMT, up from estimates last week of 660 TMT. Prices were said to avg $445/mt cf.
*** Jordan bought 60 TMT of milling wheat at a price of $445/mt C&F. They had been in for as much as 120 TMT.
*** Egypt has contracted to buy 180 TMT of wheat from India. This is much less than the initial volume sought of 500 TMT.
*** Saudi Arabia's state grain buyer SAGO bought 495 TMT of wheat, paying between $434.90/mt and $449.45/mt C&F.
*** June 29 Taiwan's MFIG is in for 40 TMT of US milling wheat. Types sought include Northern Spring, HRW and White.
*** 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.