Analysis: Wheat

Wheat Benefits From Short Covering, Wet Weather in Australia

Nov 17, 3:40 pm | Wheat

US wheat futures rallied 4-6 cents, mostly amid strength in corn and a lack of meaningful rain included any Argentina’s two-week forecast. Managed funds’ net short position in Chicago as of Tuesday totaled 109,000 contracts, down 16,000 from the prior week but still rather large. Fundamentally, more attention needs to be paid to Australian precip in the coming weeks, as La Nina’s impact there is occurring at exactly the wrong time.   The 8-15 day outlook in Australia has trended drier – no longer is there risk of flooding – but a pattern of above normal rainfall is probable into mid-December. The CFS model’s latest 16-30 day outlook is at left; E Australia’s wheat belt is highlighted. At the least this…

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Wheat Steadies at Technical Support; Egypt Tender Caps Rally

Nov 16, 4:38 pm | Wheat

US and European wheat futures ended unchanged. Both markets have found support at/near recent lows, and fresh news today is mixed.   Egypt secured a hefty 240,000 MTs of Russian wheat at $195/MT, basis fob, down another $1.50/MT from its purchase last week – despite renewed uncertainty over Egypt’s ergot tolerance – and clearly it’s still a buyers market. Russian quotes today are a bit weaker; EU cash markets are unchanged.   US weekly export sales totaled a decent, but not great, 18 Mil Bu. This is down 10 Mil on the previous but slightly above what’s needed to hit the USDA’s target. Traditional importers have stepped up coverage following the recent break, and ARC looks for steady US export…

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Wheat Falls on Egyptian Uncertainty; Egypt Also Releases New Tender

Nov 15, 4:03 pm | Wheat

World wheat prices ended lower as Egypt’s phytosanitary standards are still very uncertain – whether ergot will be tolerated or not – which on the margin would act to close Egyptian interest. However, following today’s break, Egypt is seeking optional origin supply for early January arrival, and the results of the tender are anxiously awaited. It’s expected that Russia will again be awarded the business, but at what fob price?   Otherwise abnormal warmth will persist into early December across the whole of Black Sea region allowing exports to continue unabated. US crop conditions will stay steady, though more attention will be given to developing dryness across the Plains and rain/snow fails to materialize in the next 2-3 weeks. NOAA’s…

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New Crop Russian Wheat Supply & Demand

Nov 14, 4:39 pm | Wheat

Two issues will keep growth the US’s share of world trade limited over the next 12 months, and both center on Russia. The first is that following incredible yields in 2017, trend yield in Russia will be elevated, and in fact trend yield there is growing at a pace much faster than anywhere else. A simple 20-year linear trend in 2018/19 is pegged at 2.68 MT/HA. Trend yield in Russia has grown 27% since 2010, which compares to growth in US trend wheat yield of just 9%. Russian farmers keep getting better. The second is that, while logistics will indeed cap exports, carryover stocks are forecast at a near record large 17 MMTs. This will keep the domestic market in…

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Wheat Steadies on Turnaround Tuesday

Nov 14, 4:26 pm | Wheat

The US dollar plunged today, and with wheat not subject to changing biofuel margins the market was allowed to stabilize following Monday’s collapse. There’s little fresh news available, though there’s talk Egypt may again lower its ergot tolerance to 0%, and as the ruble continues to weaken rallies will be limited to fund short covering affairs. ARC pegs managed funds’ net short this evening at 124,000 contracts.   Even other world markets appear stuck. EU & Black Sea fob offers continue to do very little on a weekly basis and are offered near parity with one another through winter (Russia still wins based on quality & freight). Gulf basis, however, has rallied and has pushed comparable HRW offers to levels…

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Wheat Plunges on Exporter Currencies, Lack of News

Nov 13, 4:17 pm | Wheat

The Russian ruble found new lows for the recent move, and as such lowered the cost of replacement in interior markets across the country. Russian fob offers this evening are unchanged, but the market seemed to have slowed demand above $196/MT, basis spot, and so we expect both rallies and breaks to struggle into the holidays.   We also mention that managed funds as of last Tuesday were short a net 125,000 contracts, not quite a record but far more than expected. Funds are also short a net 24,000 contracts of HRW, which is getting rather close to the all-time record posted in mid-2016. The market for new short positions is lacking.   US winter wheat crop conditions as of…

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CME Wheat Ends Stronger; World Cash Market Unwilling to Break

Nov 10, 4:09 pm | Wheat

US futures ended with modest daily and weekly gains, and overall world prices have failed to react to Thursday’s bearish corn data. Russian domestic wheat prices continue inch higher after finding bottoms in September, and despite marginal weakness in the ruble Russian replacement values are up $1-2/MT this week. The point is we doubt Russian fob prices, which are still driving world markets, hold much downside risk.   The CFTC’s commitment of traders report will be released Monday afternoon, but ARC estimates managed funds’ net short position as of today at 95,000 contracts, vs. 111,000 last Tuesday. There’s no need for any great liquidation of short positions, but nor is there any compelling reason for the market to collapse in…

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Analysis of the USDA’s November Reports

Nov 9, 4:52 pm | Corn, Soybeans, Wheat

World 2017/18 stocks of wheat/soybeans are record large and up a combined 13 MMTs, while world corn stocks are down 23 MMTs to 204 MMTs! The net result is that Global Major World Crop ending stocks are down 10 MMTs, the first stock fall in 4 years! From 2012 into 2016, world major grain stocks grew just over 50% as world grain production was nearly double the growth in world demand. Somehow, world grain consumption has to catch up with production with most private estimates pegging China’s corn stocks some 75-100 MMTs above the WASDE forecast of 79 MMTs.   The graphic of global major crop ending stocks reflects that there is an abundance of grain in the world, and…

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CME Wheat Ends Volatile Session Unchanged; Spring Wheat Rallies

Nov 8, 4:38 pm | Wheat

CME/KC wheat rallied into the close, ending well of session lows and near unchanged on the day. Spring wheat contracts rallied 7-9 cents, and quietly have advanced 4% from October’s lows. Very few changes are expected in  the US wheat balance sheets from the USDA on Thursday. World wheat could see a  modest downward adjustment to Australia’s crop and a slight boost to Russia’s production.   The wheat market has been unwilling to rally, and in recent weeks has drifted lower. Egypt secured two cargoes of Russian wheat at $197/MT, basis fob, down $2 from its last purchase in mid-October. Notice, too, that Argentina has resumed its role as the world’s low cost exporter. New crop Argentine wheat is offered…

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CME Wheat Again Fails at 20-day MA; Currency Performance Disappointing

Nov 7, 4:53 pm | Wheat

CME/KC wheat futures ended slightly lower, which ARC views as mostly a function of ongoing weakness in major exporting countries. Like corn, Dec CME has been stuck between its seasonal low and its 20-day moving average, and even the USDA’s November WASDE is likely to lack fresh input.   Major exporter currencies have become de-coupled from crude’s advance, and moved noticeably lower in Australia, Canada and Russia. Notice that, over time, crude’s relationship to currencies is quite strong, but weakness in Russia’s ruble in particular this week has been a disappointment to the bulls. Russian fob offers are pegged this evening at $192/MT, vs. $194/MT in late Oct, and amid ongoing warmth in Southern Russia a pace of record wheat…

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