Afternoon wheat commentary: Plenty of negative influences around the wheat complex this week, but plenty of Global demand around as well
The first few minutes of the night session was quite dramatic across the wheat complex as HRW futures raced out to 17 cents higher, SRW futures traded out to 14 cents higher and Mpls futures traded as much as 12 cents higher. Those early gains were not very lasting, which will make me remind everyone please be careful when putting in any large size orders at night, or even medium sized markets orders. The volume is just not the same at night as it is during the day. After the markets came back to reality, price action still remained slightly higher through the early morning hours, but shortly after the European markets opened, wheat futures here in the US broke ten to fifteen cents, and price action over the balance of the night turned more mixed to slightly lower. After an inauspicious start to the day session, price action reverted back to how it was trading at the end of the night, with the markets battling both sides of unchanged. That trend would turn to a lower bias once trade moved into the latter half of the day, with KC futures falling to around 15 cents lower, and Chicago and Mpls falling to a dime lower. All three classes of wheat settled in the lower end of its trading range, however, Mpls has some buying in the final minute of their trading session, with futures rallying 7 ½ cents into the closing bell.
For the week, Chicago Sept finished 32 cents lower, but despite the disappointing finish, the trading range of the past five weeks mostly remains intact. KC Sept futures finished the week around 26 cents lower and is more firmly entrenched in its trading range over the past five weeks. Mpls Sept finished the week around 20 cents lower, and like KC, is more firmly rooted in its trading range over the past five weeks.
It might not have been the biggest influence of the week, but it sure was talked about the most. And that was the re-opening of Ukrainian exports out of their Black Sea ports. Turkish defense forces say three grain vessels left Ukraine ports this morning, with one vessel departing Odessa, and two leaving from Chornomorsk. Even though the three vessels were carrying mostly corn, the mere fact that Ukraine can export grain in more capacity starts to diminish any premium that was built into trade from this major issue. Then there is the US Dollar. It made a positive technical move earlier in the week, then traded sideways for a couple days, before finishing the week today strong. It stopped a two-week weekly slide, which makes how the Dollar performs next week a little more important. The wheat complex is not hoping for the strong finish to this week carry over to next week as demand for US wheat has finally been stringing together some pretty solid weeks of sales, and it does not want to be thwarted by a rising Dollar. We have yet to see what the fallout is going to be following the Speaker of the House Nancy Pelosi's trip to Taiwan earlier this week. That surely gave the markets a negative slant Monday-Tuesday. Some of China's past responses to such incidents have been to just stop buying US grain. Have to wait and see. But for now, the one positive influence around trade is the plethora of Global wheat business around, with Algeria picking up over ten cargoes, Iran picking up three to four cargoes of Russian wheat, and Jordan, Korea, Tunisia, Taiwan and Japan all picking up some wheat this week. This demand may not have given the markets a strong bounce, but it did seem to be enough to keep the markets from completely unraveling. Next week we have the Aug WASDE from the USDA. It may take on more meaning as the USDA said back in June it will re-survey Minn and the Dakota's and make any acreage adjustments in this report. Also, the USDA has a tendency of making some decent-size production changes across the classes of wheat.
This afternoon's CFTC report was expected to show that the large spec was sellers of around 7,500 contracts of Chicago wheat during the week ending August 2. What the data showed was that they were sellers of 3,136 contracts, which at the time, increased their net short position to 54,475 contracts. In KC, funds were buyers of 195 contracts, which at the time, lowered their net short position to 11,909 contracts. Managed money was sellers of 4,579 contracts of Chicago wheat, which at the time, increased their net short position to 14,970 contracts. In KC, managed sold 1,049 contracts, which at the time, lowered their net long position to 9,992 contracts. In Spring wheat, managed money sold 1,010 contracts, which at the time, flipped their position from a small net long, to a net short of 652 contracts.
Russia's Ag Minister said the country may not achieve its 130 MMT grain harvest forecast, attributing the miss on weather issues, and lack of spare parts for foreign made equipment. The minister said they may have to revise their grain export plans from the current 50.0 MMT.
France estimated their 2022 wheat production at 33.87 MMT. This compares to their forecast last month of 32.90 MMT.
The BAGE said wheat crop received beneficial rains late last week, helping to ease drought conditions in key growing areas.
Ukraine farmers have thus far harvested 17.5 MMT of grain. Yields are averaging 3.64 mt/hectare. The total includes 12.6 MMT of wheat. Ukraine's ministry data showed that exports so far in 2022/23 include 1.25 MMT of corn, 444 TMT of wheat and 165 TMT of barley.
The French Farms Ministry said they will relax crop rotation rules, and fallow land rules next year to help boost grain and oilseed production while the war in Ukraine continues.
The Food and Agriculture Organization's (FAO) food price index, which tracks the most globally traded food commodities, averaged 140.9 points in July versus a revised 154.3 for June. The June figure was previously put at 154.2.
Export business around this week:
*** The Philippines rejected all offers in their tender for either 150 TMT of milling or animal feed wheat citing too high of price.
*** Iran's GTC is said to have bought between 180 and 240 TMT of Russian wheat, paying from $446.30 to $448.30/mt C&F.
*** Japan bought 122,103 mt of US, Aussie and Canadian wheat. The breakdown was 32,410 mt of Canadian 13.5 pro WRS, 35,013 mt of Aussie White, 21,550 of US White, 15,970 mt of US HRW and 17,160 mt of US 14 pro DNS.
*** Taiwan bought 50,910 mt of US wheat, of which 29,795 mt was 14.5% pro DNS at $381.94/mt FOB, 13,670 mt of 12.5% pro HRW at $391.65/mt FOB and 7,445 mt of 9.5% pro White wheat at $358.99/mt FOB.
*** Algeria's OAIC is said to have bought 720 TMT of wheat, paying $384/mt C&F for the entire volume. The tender is for three shipping periods. This compares to the $445.00/mt C&F the OAIC paid for 740 TMT in their prior tender at the end of June.
*** Tunisia bought 125 TMT of wheat (more than the 100 TMT they were in for), but prices had yet to be given.
*** South Korean flour millers bought 50 TMT of US milling wheat and 50 TMT of Aussie wheat, but no prices were given.
** Jordan bought 60 TMT of milling wheat (had been in for 120 TMT), paying $404.00/mt C&F.
*** Aug 9 Jordan is back in for 120 TMT of milling wheat.