Ample wheat supplies and a slight decrease in demand have alleviated most of the recent concerns about production.  If the majority of the wheat crop experiences normal weather patterns, these markets are going to fight strong resistance.  Support is going to have come from outside factors such continued strength in beans; possible support in corn and most importantly further weakness in the US dollar.  The trade will be watching the factors closely as harvest approaches.

The majority of the northern hemisphere wheat crops are in good condition.  Crop conditions in Europe and the Black Sea region are generally rated as good.  The planting of spring crops in the Ukraine has progressed nicely.  The US Hard Red Winter wheat crop ratings indicate a slight deterioration over the course of last week.  The worst conditions have been experienced in Texas, which rated 67% poor/very poor, and Oklahoma, which rated 50% poor/very poor.  Kansas is rated 19% poor/very poor.  Most of these areas have received beneficial rain fall.  Additionally, rain is forecasted for many of these areas later in the week.  It appears the cold temperatures of last week may result in a loss of 25 to 50 million bushels.  However, the cool temperatures and light rains experienced since that event have been close to ideal for preventing further damage.  Expect Hard Red Winter wheat crop conditions to improve over the course of the next few weeks.  Normal weather from here forward will allow the condition of later crop to improve into harvest.  The Soft Red Winter wheat crop is in good condition.  The forecast for dry weather and warmer temperatures in Soft Red Winter wheat growing regions is welcome.

Spring wheat plantings are behind schedule.  Extremely wet conditions in many areas and intermittent rains in areas that have seen some progress are going to put spring wheat plantings well behind schedule.  Washington at 30% planted and Idaho at 18% planted have completed about half of their normal progress.  South Dakota may be a week behind.  Montana, Minnesota and North Dakota are not behind as of yet, but do not expect much progress in these areas.  Extremely, wet conditions in western Minnesota and North Dakota are going to need time and some help from Mother Nature to dry out.  Many of these areas could receive rain through the weekend.  Hopefully, those rains won’t fall in the Red River Valley.  Weather is expected to dry out once we get through the weekend.

Lower futures and a weaker dollar have improved the competitiveness of US wheat.  However, Egypt purchased a combined total of 175,000 metric tons Russian and French wheat on Thursday.  Japan and Korea have also made some routine purchases.  Net sales, for the week ending April 9th, of 121,500 metric tons for 08/09 were well below last week and the 4 week average.  Net sales for 09/10 were 189,000 metric tons.  Exports of 486,700 metric tons are above the prior 4 week average.  Tender activity on the break had been quiet until Wednesday afternoon.  Iraq is in the market for at least 50,000 metric tons.  Syria tendered for 200,000 metric tons of soft wheat.  Morocco tendered for 19,000 metric tons of milling wheat.  I would not be surprised if Syria cancelled the tender at least once.  Morocco will likely source wheat out of some other country.

July wheat in Chicago should continue to find support at $1.25 to $1.30 over July Corn.  That seems to be the low end of the range on that spread.  Expect wheat rallies to be generated on short covering.  These rallies will likely consist of Chicago gaining on KC and Mpls.  At this point, it appears these rallies should be sold, but you can give them some room as the possibility of fund short covering does exist.            

If you would like more information about this article, please contact Brian Henry at 1.877.377.7965 or email him at brian.henry@archerfinancials.com .
 
 
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