Off to the Races! – June 30, 2017

June 30, 2017

Off to the Races!

There is no doubt that wheat fundamentals have done a dramatic about-face, led by none other than spring wheat. It’s rare that Minneapolis leads the wheat complex, much less the grain complex. But when it does, it’s for a reason and it gets exciting.

 

For the last few three, years, we’ve seen high protein spring wheat production decline. Some of that was due to lower plantings as farmers across the prairies made a mass exodus from wheat in general. But too much rain the last couple years produced ample amounts of winter and spring wheat, but little protein. Commercials used carry-over stocks to blend and get by, but this year the supply of hi-pro’s are very tight, with futures and cash premiums soaring higher.

 

The plantings reports from Canada and USDA have added fuel to that fire, with both countries’ spring wheat plantings much lower than expected. Now throw a major drought in the mix and you have an explosive situation; Minneapolis reached a 3-year high this week.

 

For a summary of the USDA plantings and stocks report, click here.

 

The winter wheat markets were initially left behind by the surging spring wheat market, but late this week they were doing pretty well at keeping up. Production problems in Europe and Ukraine are getting the market’s attention, finally, and that price action will largely take place in the Chicago market.

 

If the Northern Hemisphere’s current weather patterns persist, then wheat likely has much more upside to it. The forecasts for the first half of July not only call for the weather patterns to persist but intensify here in the US and Ukraine. Drought conditions in the Northern Plains/Canadian Prairies look to get worse and creep into the western Midwest. Ukraine looks to get hotter and drier as well. Europe looks to get a break with some rains moving through.

 

Now that the plantings report is behind us, it’s all about weather. Wheat has been the first to make a move but corn and soybeans are perking up as well. It would appear that prices have more upside potential, particularly as we head into the key pollination period after mid-July.

 

Call options would be a good way to capture potential upside, especially for replacing grain sales. September options should be enough time as they expire August 25, taking us through the key pollination periods for corn and beans.

 

THIS IS A SOLICITATION. Reproduction or rebroadcast of any portion of this information is strictly prohibited without written permission. The information reflected herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. In an effort to combat misleading information, Opinions expressed are subject to change without notice. This company and its officers, directors, employees and affiliates may take positions for their own accounts in contracts referred to herein. Trading futures involves risk of loss. Past performance is not indicative of future results.