With big cuts to wheat production in Russia and Canada, along with a downturn in U.S. wheat production, the Thursday, Aug. 12, World Agricultural Supply and Demand Estimates report helped propel wheat to new heights on Friday.
"Overall, it was a bullish report for wheat and a little bit surprising to the trade," Randy Martinson of Martinson Ag Risk Management told AgweekTV's Michelle Rook on the Agweek Market Wrap, sponsored by Gateway Building Systems. "We didn't expect there to be that big of cuts."
Kansas City wheat hit a seven-year high, while Minneapolis hit an eight-year high. But how much higher might it go?
"We've got a little bit of room to move," Martinson said. However, he doesn't expect wheat to break $10 in the short term.
One part of the WASDE where wheat production wasn't cut much was spring wheat. With abandonment expected to be high, Martinson expects that change could come in September or later.
Soybeans also finished strong on Friday. Though the WASDE didn't change much about soybean production, a string of seven straight days with export sales changed the mood a little. Rook said she added up sales of 63 million bushels in those seven days.
It appears, Martinson said, that Brazil's production problems have put it out of the market, leaving U.S. beans a necessary purchase for China.
More hot, dry weather could push the market even farther, and Martinson thinks soybeans could test the $14 level.
Corn had the most bullish numbers in the WASDE report, with a 5 bushel per acre drop in yield. Though Illinois, Indiana and Ohio are expected to have record yields, the western Corn Belt and Northern Plains production problems due to drought finally got some "respect," Rook said.
Martinson said the cuts in North Dakota, Minnesota and South Dakota amounted to 20-30% cuts from last year's yields, which was surprisingly big. A lot of corn in those states already is being chopped, baled or abandoned.
The western cuts made a big difference to the overall yield values.
"That was enough to make a difference, and it does show that we've got some pretty big records out in the eastern side, but we are pulling them down," Martinson said.
What hurt the corn market this week was rumors of sales with no follow-through. However, the market still closed up for the week.
Cattle, Rook said, saw steady cash trade and boxed beef in record territory.
"So that disconnect just keeps on, keeping on, doesn't it?" she asked.
"It does," Martinson responded.
He said cattle have had decent production reports that should help the markets, reports of tight supplies and a stock market putting in record highs. That all should help, but fear remains that restaurant demand will slow, he said.
But tightening supplies and cattle herd contraction are expected to continue as the drought drags on.
"It's going to be interesting to see just how we're going to be feeding cattle going into the winter because of tight feed supplies as well," he said.
The hog market had a little bit lower weekly close. But with the strong cattle market and tight supplies, that market should be climbing as well, Rook and Martinson discussed. A couple rough days in the markets recently were tied to fears of COVID-19 and African Swine Fever, Martinson said.
"I think if we can get some of that fear out of the way I think we could really start to see the hogs perform better," he said.