March 31, 2017
Bullish Corn Plantings Support Wheat.
Wheat markets were generally quiet during the week, with spring wheat gaining on the winter wheats, until after the plantings and stocks reports were released on Friday. While most of the volatile price action was initially centered on corn and soybeans, wheat emerged with some active price action of its own.
A bullish corn plantings report supported both corn and Chicago wheat. Kansas City mostly kept up with Chicago but Minneapolis did not, erasing all the spread’s gains for the week. Soybean plantings were higher than expected and prices dropped, testing last summer’s lows but finding decent support there.
A quick summary of the reports: All wheat plantings were 46.1 million acres, down 4.0 million from last year. All winter wheat at 32.747 million was 3.42 million less than last year; other spring wheat at 11.308 million was down 300,000 from last year.
Corn plantings were pegged 89.996 million, down 4.0 million from last year; soybeans plantings were estimated at a record 89.482 million, up 6.07 million from last year.
Quarterly stocks as of March 1, 2017: Corn 8.616 billion bushels, up 794 million from a year ago; soybeans at 1.734 billion bushels were up 200 million over last year; and wheat at 1.655 billion was up 283 million.
For a more detailed summary of both reports, click here.
For wheat, seeing corn have a bullish report helped push prices higher. It appeared that there was likely some short covering going on as well; likely large fund traders liquidating long soybean positions and covering the short side of the spread, which is normally wheat.
As we move past the reports, the market’s focus will return to weather in the central plains, which has turned very good for the aggressively growing wheat crop. Recent rains with more in the forecast will all but eliminate dry conditions across most of the plains, and should be almost enough to bring the crop to maturity.
With dryness no longer a problem, a frost would be the likely remaining risk factor. There is a cold front forecast to move into the plains, but at this point doesn’t appear to be cold enough to do any damage. That said, with the crop at least two – three weeks ahead of schedule, even a normal frost event could pose a problem. So far, we don’t see that threat on the horizon.
Other Northern Hemisphere weather is also looking generally good. There is a major cold event moving across much of Russia, but recent fresh snow should be enough to protect the crop. They are looking at late start to their growing season with cold temps and lingering snow keeping the crop in dormancy. It could pose a problem if the crop is delayed into the heat of summer, but it is not an issue at this point.
Export sales this week were good, with 628 TMT sold (163 TMT were new crop). While year-to-date sales are running 37% ahead of last year, the pace needed to meet USDA’s projections are falling short. With only two months left in the marketing year, wheat sales are 3 percentage point behind the average for meeting those projections. Even though USDA raised the export estimate two months ago, it’s looking likely that they may need to ratchet that back over the next couple supply/demand reports.
Technically, wheat is nearing major support at the December lows. There is virtually no weather premium remaining – but then we don’t see a weather threat, either. With an impressive outside day higher off of the major support, one could argue that an important low has been established in the winter wheat markets, particularly if one also argues that corn has found a low as well with its huge outside day higher. Spring wheat looks to have a different story, suddenly finding itself losing again to the winter wheats.
While a bullish scenario for wheat is unlikely at this point, I don’t look for more pressure at least in the near term. Covering hedge shorts would look to be prudent, with the intent to re-establish those shorts on a rally or weather scare.
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