It pays to know spring from winter.
In wheat terms,
especially, with Minneapolis-traded spring wheat providing some succour for bulls
which the winter contracts have found harder to come by.
Indeed, it is not just in the flat price that the contract
has proved a winner late this week, with the May spring wheat contract adding
3% in over the previous two sessions, and jumping back above its 100-day and
200-day moving averages.
(For chart watchers, these gains followed a "doji" - is a
day when the market trades higher and lower, but ends close to where it started,
so forming a cross. This is a pattern associated with market decision, and can
herald a change of tack.)
Spring wheat's performance of late has also proved particularly
strong compared with the winter wheat contracts.
After a poor start to March, the premium of Minneapolis futures
over Chicago soft red winter ones, May basis, soared 25% from March 8 to the last
This spread chart too has broken above a series of moving
averages, including the 100-day and 50-day lines.
But US spring wheat faces its own weather issue.
Much talk of late has been on the frost in some more eastern
US areas earlier this week, which may have burnt some winter wheat crops, which
are more vulnerable now they are emerging from dormancy.
At Futures international, Terry Reilly's assessment was
actually that "temperatures were not cold long enough to cause widespread
"Wheat damage was more likely across the south eastern
states were the crop is more advanced."
'Exacerbate crop stress'
And then, of course, there is the southern Plains dryness,
with 74% of Oklahoma in drought, and 39% of Kansas, the top wheat-producing
Sure, rains are in the forecast for next week, but how much,
and for where?
"Forecasters do have a storm system pencilled in for US hard
red winter wheat regions mid next week, but say the western parts are likely to
be disfavoured for significant rain," said Tobin Gorey at Commonwealth Bank of
In the meantime, "higher temperatures are likely for hard
red winter wheat regions over the coming weekend. The heat and dryness will
exacerbate existing crop stress in the region."
For spring wheat, temperatures will also be an issue, and
when soil warms up enough to allow seed germination.
But more immediately, there is the worry about when farmers
will be able to get onto the land in the northern, spring wheat-growing areas,
with the rains due in the US next week not so helpful.
"The Red River of the north basin will see additional
precipitation through the end of the month, raising the risk for spring
flooding," Futures International's Terry Reilly said.
'Lack of producer
Meanwhile, more immediate spring wheat supplies are being
squeezed by a "lack of producer selling", which has supported a "steady to
firmer" cash market, Benson Quinn Commodities noted.
Remember that while US supplies of wheat overall look ample,
with stocks seen soaring 16.7% to a multi-decade high of 1.14bn bushels over
2016-17, that is focused on lower quality varieties.
US stocks of spring wheat, offering higher protein levels,
are forecast by the US Department of Agriculture dropping 28% this season, to 197m
In fact, Minneapolis spring wheat for May fell 0.2% to $5.47
a bushel as of 08:45 UK time (03:45 Chicago time), giving back a touch of its
premium to Chicago winter wheat, which eased a more modest 0.1% to $4.35 ¾ a bushel.
But whether that is down to end-of-week profit-taking on the
'Feeling the love'
Certainly, gains were hard to come by in early deals, even
in corn, after a run of three
positive closes, buoyed by bumper US export data.
In weekly US export data on Thursday, "corn sales surprised
to the upside at 1.25m tonnes with weekly shipments of 1.58m tonnes a marketing
year high," Benson Quinn Commodities noted.
"US corn is once again feeling the love from overseas buyers,"
CBA's Tobin Gorey said, adding that "the chunky $0.20-a-bushel price falls in
early March have clearly done the job in drumming up extra business.
"US corn is currently priced to move as it should be," –
that is below early 2017 highs, given that the "looming Brazilian crops have
had a good season so far and are poised for large production potentials".
Whether this means that corn futures will struggle for
further gains from here, well, the May contract stood down 0.1% at $3.65 ¾ a bushel.
Signally, the contract failed again, as it did in the last
session, in an effort to break above its 100-day moving average, at $3.67 a
How the contract fares later may depend on movements in the dollar,
which has weakened sharply this week amid disappointment that the US Federal
Reserve has not given stronger signals of further rate rises ahead.
A weak dollar improves the affordability of US exports, such
as corn, wheat and soybeans.
'Very sharp drop-off'
Indeed, a mixture of dollar weakness and a drop in US soybean
prices for most of March appears "to have revved up export interest" in US
soybeans, CBA's Tobin Gorey said, flagging that latest weekly export sales beat
"The upside for soybeans though remains limited by a huge
South American harvest," with Brazilian supplies in particular coming on line.
And this at a time of some concern over values in China, the
"The soybean situation in China has not been doing well
lately," said Joe Lardy at CHS Hedging, flagging a "very sharp drop-off" in
futures on China's Dalian exchange, where the May contract is down 10% over the
"Crush margins in China have also been falling off sharply."
Still, even if only down to profit-taking on short positions,
or long corn-short soy spreads, soybean futures for May nudged 0.1% higher to
$10.02 ¼ a bushel, also gaining kudos for retaking, and holding, the psychologically
important $10-a-bushel mark.