Wheat holds double bottom

(Agriculture.com) – Wheat markets continued to try to fend off the pressure from corn and beans, managing to hold the early July lows while the row crops dropped to new lows for the summer. Fundamentals are improving for wheat but the bearish attitude for corn is still holding the wheat bulls in check.

Harvest pressure is over for the winter wheats and both Kansas City and Chicago appear to be establishing double bottom formations. Unfortunately, we can’t say the same for Minneapolis that put in new lows again this week. It did manage to bounce late in the week along with the winter wheat markets, but it has yet to see the harvest pressure begin.

As harvest progresses through the Northern Hemisphere, we see the fine tuning adjustments being made. Russia appears to be lowering their wheat production estimates while Ukraine and Kazakhstan increased theirs this week. Russia’s Ag Minister pegged wheat yields at 3.07 tons/hectare, up .6 from last year, for a total production estimate of 48 MMT, down slightly from their last projection and 6 MMT less than USDA’s last estimate. Ukraine increased their wheat estimate about 3 MMT and Kazakhstan lifted theirs 1.3  MMT to  16 MMT, up 7 over last year and 1.5 above USDA.

The EU saw their wheat estimates increased 3 MMT to 131.7 MMT. This week, Lanworth estimated total world wheat production at 694 MMT, 4 less than USDA’s July estimate.

However, most of the Northern Hemisphere is ratcheting downward their production of quality wheat. We’ve already seen estimates from China of about 20 MMT of sprout damage to their wheat. Europe is also lowering quality estimates in the key countries of France and Germany.

This week we also saw frost damage hit southern Brazil production, prompting another estimated 400 TMT purchase from the US for hard red winter. Brazil has been an unusual presence in the US market since early in the calendar year. While normally being one of the world’s largest wheat importers, they rarely get on the radar since most of their imports typically come from Argentina.

However, a short crop from Argentina last year prevented them from selling hardly any wheat this year, forcing Brazil to come to the world market. But Brazil demands high quality hard wheat, making the US pretty much the only other supplier.

Exports continue to be larger than normal with another 597 TMT sold last week, within the trade’s range of estimates. China and Brazil were two of the biggest buyers with 130 TMT and 88 TMT respectively. For the marketing year-to-date we’ve sold 44% of expected sales; the 5-year average is 32%.

We also had good news on the western white wheat front with Japan formally announcing they’ve lifted the ban and then they promptly some. Let’s all hope that’s the last we hear of the GMO issue.

Looking forward, we have a supply/demand report on the 12^th, and more weather concerns for the spring crops. There has been a bunch of comments about the cool weather delaying corn and soybean development along with increasing prospects for an early freeze. That all remains to be seen, but for now I look for the wheat double bottoms to hold and the seasonal rally to kick in very soon.