Ray Grabanski, Progressive Ag
Wheat Southern Plains weather and exports led the direction of the wheat markets this week. We've had nine sessions in a row of gains in the Minneapolis market. The weekly U.S. Drought Monitor continues to show much of central Texas, western Kansas and western Oklahoma falling into abnormally dry to severe drought with a few pockets of extreme drought.
Wheat The U.S. Department of Agriculture monthly World Agricultural Supply and Demand Estimates report was viewed as neutral to friendly to the wheat complex. USDA estimates 2019-20 U.S. ending stocks at 974 million bushels, which was lower than pre-report estimates of 1.01 billion bushels and compared to 1.014 billion bushels in November. Exports were revised 25 million bushels higher and imports were lowered 15 million bushels.
Wheat The wheat market struggled this week as both export sales and export inspections posted multi-week lows. There were a few underlying positive developments with lower Australian production estimates and a lower U.S. dollar, but in the end buying interest dried up with upcoming Canadian and U.S. crop reports.
Wheat December Chicago went to 18 cents premium over Minneapolis in Nov. 21 trade. The March Chicago contract is around a 3.25 cents premium over Minneapolis. It is a very rare occurrence that Chicago trades at a premium over Minneapolis. It was close to even this spring when the May contracts were going into delivery and the last time it happened was in November 2015. The other occurrence in my memory was the summer of 2007 before the record run up of wheat prices in 2008.
Wheat The U.S. Department of Agriculture released baseline projections for 2020-21 as part of the government's budget process. All wheat acres for 2020 are expected to be 45 million with a trend line yield of 48.2 bushels per acre. This equates to 950 million bushels of carryout stocks in '20-'21 versus the 1.043 billion bushels projected in '19-'20.
Wheat The wheat market was on the defensive this week as much of Oklahoma received 0.5 to 1.5 inches of rain over the past weekend. Much of the soft red belt received 1 to 2 inches of rainfall in the same period.
Wheat The wheat complex had a negative tone with improving Canadian harvest progress and poor weekly export sales. Chicago and Kansas City contracts experienced key downward reversals in Oct. 21 trade. The U.S. dollar leveled off and rebounded off the $97 area December after a week of declines. The Bank of Australia estimates wheat production at 15.5 million metric tons, well below U.S. Department of Agriculture's current estimate of 18 million metric tons.
Wheat The U.S. dollar trended lower to the $97.30 area December after breaking $98 support in Oct. 16 trade. World values have been increasing with the continued uptrend in Matif wheat futures to over $180 per metric ton. Thoughts of declining production in Australia, Argentina and North America were also supportive to the wheat complex this week.
Wheat The October World Agricultural Supply and Demand Estimates report found more wheat in the U.S. and in the world. U.S. carryover stocks are estimated to be 1.043 billion bushels versus. pre-report estimates of 1.015 billion bushels. The primary drivers of this were a 30 million bushel cut in feed wheat usage and a 25 million bushel cut in exports for 2019-20. There was also a 6 million bushel cut in feed usage for 2018-19 that carried in as additional stocks in 2019-20.
Wheat The Quarterly Grain Stocks report pegs spring wheat at 600 million bushels versus 585 million bushels expected. Durum is 58 million bushels versus 56 million bushels expected.