Wheat is Leading the Recovery
Category: Grains
(AgWeek) – World production cuts continued this week sending Matif wheat futures to highs last seen in 2014. Ukraine’s wheat production is estimated at 24.1 million metric tons down from 27.8 million metric tons by a private firm. Poland estimated their winter wheat crop at 8.4 million metric tons, 16 percent less than a year ago. Germany is expected to harvest 18 million metric tons, down 25 percent from a year ago. SovEcon estimates Russian wheat exports at 35 million metric tons, 10 million metric tons less than last year and 5.1 percent from their previous estimate.
$6.00 cash seems to be a number that our northern growers gravitate to and the same is true in the Kansas winter wheat belt. With September 2019 Minneapolis trading $6.45 and July Kansas City trading $6.16, it is more likely for Kansas City to get to the $6.40 area less basis to attract more acres this fall. The thing about it is though, when everybody starts moving one way, the market can say it’s done its job and start backing off. I would expect the Chicago and Kansas City markets to hang in there through fall planting, although we could see some harvest pressure in Minneapolis. Minneapolis wouldn’t need the acre buy until next spring, but if the winter wheat belt effectively buys more acres this fall, that would certainly limit upside potential.
A number of analysts think that our exports will improve given the world situation. It’s hard to disagree with that. But will Russia give up market share that they have fought so hard to gain in the last few years? U.S. front month wheat contracts are trading in the $5.60 to $6.00 futures range. Will foreign countries buy at these prices, or does the U.S. have to back off some in price to cut into Russia’s export share? That question will be answered in weekly export numbers in the coming months. So far we are off to a dismal start for the new marketing year but we could see decent increases for the second half of the shipping season. The U.S. dollar value will also answer this to some degree.
Weekly export sales for all wheat totaled 14.1 million bushels (382,500 metric tons) for the 2018-19 marketing year. Total shipments plus outstanding sales of 264 million bushels are 28 percent below the previous marketing year. Weekly shipments of 14.2 million bushels put total shipments 38 percent below the previous year.
For the week ending August 2, September contracts for Minneapolis wheat were up 18.0 cents at $6.105, up 34.5 cents at $5.605 for Chicago wheat, and up 36.75 cents at $5.6925 for Kansas City wheat.
