Grains Prices Continue to Slip – August 2, 2019

Grains Prices Continue to Slip

Wheat markets took another hit this week on spillover selling from corn and soybeans coupled with Northern Hemisphere harvest pressuring world prices. Another round of tariffs in the ongoing trade war with China didn’t help as most commodities weakened in response to the news on Thursday.

 

The market did, however, manage to find some buying on Friday in what looks like another turn in the market to start a new month. It has become common to see grains find either a low or high at the beginning of the month, and the selling into July’s end set the stage for some strong buying today.

 

Minneapolis rallied off former contract lows in what could be a double bottom. Kansas City didn’t quite get to the contract lows but did bounce off a minor support. Chicago didn’t dig quite as deep, but it was the leader higher to start the new month.

 

Export sales of 383 TMT were within the range of estimates but about half of the previous week. We’ll need to see better performances if we’re going to meet USDA’s recent uptick in export projections.

 

Ukraine is definitely seeing an uptick in their exports. This week, they reported their winter grain harvest at 86% complete. For the month of July, all grain exports at 3.7 MMT were up 54% over last July, with 1.4 MMT being wheat. Wheat prices were up about $4/MT on the strong demand. It is worth noting that they still seem to be selling more than Russia at the beginning of this marketing year.

 

Ukraine’s harvest yields are better than expected while Russia’s is slightly lower in the Southern Region, where most of their exportable supplies originate. Quality likely has a lot to do with their better export performance as well, with 70% of this year’s harvest grading milling quality compared to just 55% last year. Russia’s early harvest results showed quality slightly lower than normal, but as the harvest moves north, they are finding better quality.

 

The European Union, as expected, is harvesting a much better crop than last year. Even with the heat wave that shaved yields late in the season, most European countries’ production are higher than last year. France is projecting their wheat harvest to be 39.2 MMT, up 15% over last year and the second largest on record.

 

As the Northern Hemisphere harvest moves into the final stages, harvest pressure should fade, and market watchers will shift their focus to demand. As for the Southern Hemisphere, planting conditions in Argentina and Australia were generally good, suggesting their crops are at least off to a good start. We can expect their harvest to be in full swing mid-October through early November.

 

This marketing year, wheat doesn’t have much of its own story to tell. World and domestic supplies are adequate, and wheat will closely follow corn due to the abundant feed wheat supplies here in the US and the tightening corn supplies. The next supply/demand report due on August 12 will reportedly include the NASS data on planted and failed acres – a huge unknown so far. Row crop prices have slipped significantly over the last few weeks on near ideal weather for pollination. Whichever direction corn goes, wheat will likely follow.

 

Louise Gartner,

Owner, Spectrum Commodities

 

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