Wheat Gives up Gains

December 9, 2019

Wheat Gives up Gains

Wheat prices last week gave up much of their gains from the previous week, with Kansas City establishing an outside week lower. The Thanksgiving rally quickly faded as prices once again stalled at the October highs.

Kansas City has failed to move above the mid-October and late November high, appearing to establish a well-defined trading range high. Chicago’s range high isn’t as well defined, but it also looks to be the mid-October high since the November rally only took it out for one day.

Minneapolis is in a completely different universe. The harvest rally was retested in mid-October to establish a double top and then prices fell apart as they quickly tested summer lows. In that process, Minneapolis moved discount to Chicago for the first time in years and looks poised to stay that way for a while.

World prices improved last week. Russia sold 295 TMT to Egypt at prices $3.60/MT higher than two weeks earlier. This week, it looks like Russian FOB offers are around $212/MT, up about $2/MT. This will help underpin US futures, but the export competition is fierce.

Last week’s export sales were a disappointing 228 TMT, less than half the previous week’s sales. We can hope it was due to the holiday, but expectations were much higher than actual sales.

STATS Canada reported their wheat production at 32. MMT, generally in line with expectations. Durum was pegged at 4.977 MMT, also in line with the 5.0 MMT estimate.

The Southern Hemisphere’s harvest is moving along without much trouble. Argentina reports that 46% of its harvest is complete. Production estimates have come down over the past few weeks, but they are still looking at a big crop of around 18.5 MMT. Exports have been aggressive out of Argentine for all grains as they try to get ahead of anticipated export tariffs.

Australia is also in the middle of harvest, with production estimates falling there as well. Recent estimates hover around 15.9 MMT, the lowest since 2007. Three years of drought continue to pummel their ag sector.

Winter wheat plantings are near complete across the Northern Hemisphere. France reports 83% done with 73% in good/excellent shape. Russia reports they will see acreage increase 5%, a new record, with most of the wheat in good shape. Some dry pockets have developed in Russia and Ukraine, but the market isn’t showing concern at this point as there is little correlation between fall conditions and final yields.

I look for wheat to drift lower through December into early January. The normal seasonal pattern tends to rally in mid-January as world demand resurfaces after the holiday break.

Louise Gartner,

Owner, Spectrum Commodities

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