Wheat ended 2-5 cents higher, and KC’s premium to CME has widened to $.05/Bu, basis spot. Bitterly cold temps and a complete lack of moisture warrants noticeable short covering in KC, but as HRW stocks are projected to decline further in 2018 – even assuming trend yield – ARC looks for this spread to peak at $.15-.20. March KC’s 100-day moving average rests just above the market at $4.45, and a settlement above this foreshadows a test of $4.65-4.75.
Winterkill damage will never be quantified, but certainly recent conditions will weigh on potential yields this spring/summer. More important is that zero moisture has fallen across TX, OK, KS and E CO in the last 60 days, and a pattern change is desired. Unfortunately no pattern change is indicated through Jan 17th. We also mention that abnormal warmth in the Black Sea, while perfect for exporters, makes the crop vulnerable to any shift of the polar vortex into Russia in late Jan/Feb. A close eye will be kept on N Hemisphere upper air patterns.
However, clients should be mindful that global surpluses remain and new crop catch-up sales are advised above $4.85 basis July KC.
