Afternoon Wheat Comments: A strong finish to the week for wheat
Overnight price action started a little weaker, with Chicago and KC each falling to around six cents lower during the opening hour of the night. But a little more than an hour into the evening the markets caught a bid, rallied around ten cents, and then never looked back. By the early morning hours the markets were trading around a nickel higher, with trade ultimately moving out to more than ten cents higher shortly after the European markets opened. The move stalled and futures set back a bit, but a couple hours before the night session ended a story came out (below) which triggered a 15-cent rally into the morning pause. The buying intensified once the day session opened as I am sure more people read the headlines, and futures raced out to almost 40 cents higher. A mid-morning collapse gave back much of the early gains, but over the latter half of the session the markets re-rallied, and although trade was never strong enough to re-test the highs, the markets still had an impressive finish of between 26 and 28 cents higher. Mpls was mostly a follower throughout the day and settled between 16 and 18 cents higher. Part of the markets strength was tied to the European contract (Matif), which finished more than 14 Euro's higher, which is equivalent to roughly 50 cents US. For the week, HRW futures finished more than twelve cents higher, SRW futures finished 22 cents lower (but 34 cents off its lows) and Mpls finished the week around three cents lower.
The big story of the day across the grain complex had a direct impact on wheat. In the wee hours of the morning Russian news media reported that Russia could temporarily suspend wheat and sunflower exports after a sharp drop in Global prices over the past few weeks. Supposedly the Ag Ministry and industry representatives were expected to meet to discuss the ongoing concern. Keep in mind, earlier this week Russia said they wanted to triple purchases of grain (compared to last year) for their state reserve fund to 10 MMT. Comments from the Ag Minister himself this morning only added more fuel to the speculation when he said that Russia could extend restrictions on fertilizer exports for six months (until Nov) to help support the domestic market. Some were trying to take this Russian wheat export story a little deeper, saying that Russia's next target in the Ukrainian war will be against Ukraine's agriculture, thus Ukrainian exports will be falling off very soon. Around an hour into the day, as the rumors quickly circulated, Russia came out and said they do not have any plans to ban wheat exports, but they will work to ensure exporters pay farmers enough to cover their average production costs. If exporters do not adhere to the plan their ability to get phyto certificates for export would not be issued.
Today's rally in Chicago May stalled at resistance near $7.00, set back a little, and settled right on its eight-day moving average. A settle above $7.00 level opens the door for a run up to $7.25. Going to leave support down around $6.50, as this market could start seeing larger swings in the weeks ahead. Today's price action in KC May was enough to take trade out of its recent $7.80 to $8.40 trading pattern. The door is now open for a run up into the $8.80 area but would like to see another settle above $8.40 on Monday. Support moves up to $8.20, with a settle below this level probably meaning trade has reverted back into its previous trading range. The May KC/Chicago spread settled higher for a seventh consecutive session today, and in its last four days, the spread has settled into a new contract high. Have been waiting for trade to give a sign that the spread may be tiring and may have gotten that today with its settle more than 11 cents off its highs. Not saying it could not happen, but it would be tough to see this spread make a higher high for a seventh consecutive day on Monday. Instead, look for a bit of a pullback. Initial support stays at 1.30.
The CFTC is up to date, with today's blast putting reportable positions up to March 21. Today's report showed the large spec was buyers of 7,818 contracts of Chicago wheat during the week ending March 21, which at the time, lowered their net short position to 80,447 contracts. In KC, funds were buyers of 2,579 contracts, which at the time, lowered their net short position to 18,667 contracts. Managed money was buyers of 8,757 contracts of Chicago wheat, which at the time, lowered their net short position to 86,500 contracts. In KC, managed money bought 3,971 contracts, which at the time, lowered their net short position to 8,762 contracts. In Spring wheat, managed money bought 1,823 contracts, which at the time, lowered their net short position to 2,624 contracts.
Russia's Ag Ministry estimates 93% of the country's winter crops are in good to satisfactory condition vs 95% last month.
EU grain trade group, COCERAL increased their 2023 EU and UK wheat production forecast 1.2 MMT up to 144.5 MMT.
France AgriMer said soft wheat crop conditions are 94% G&E, down 1% from last week and compares to 92% this time last year. Durum wheat conditions are 92% G&E, unchanged from last week and compares to 89% this time last year.
Ukraine's Ag Ministry said most regions have started 2023 spring planting work, with a total of 293,000 hectares of various crops planted so far. The total includes 168,100 hectares of barley, 76,100 h/a of spring wheat, 35,300 h/a of peas, and 14,200 h/a of oats. The Ministry went on to say total grain exports as of March 24 are 36.6 MMT compared to 44.8 MMT this time last year. Of the total, around 12.6 MMT is wheat, 21.5 MMT is corn, and 2.26 MMT is barley.
China's Ag Ministry said there is a large area of cooperation with Brazil in the Ag sector, including coordinating investment, research, genetic engineering, and low carbon environmental issues.
Export business around:
*** Taiwan bought 56,300 mt of US milling grade wheat. The total included DNS wheat priced at a reported $355.56/mt FOB, HRW priced at $357.05/mt FOB and white wheat priced at $287.11/mt FOB. The grain is for mid-May shipment.
*** China sold 136,815 mt of state-held reserve wheat offered at auction last week. That was 96.8% of the total offered into the marketplace and the avg price was 2,799 yuan/mt.
*** Jordan made no purchase in their tender for 120 TMT of milling wheat despite nine offers.
*** March 28 Jordan is in for 120 TMT of milling wheat.
*** March 28 Turkey's state grain board the TMO issued an int'l tender for 695 TMT of milling wheat.