Has US winter wheat
deteriorated further over the last month?
The US Department of Agriculture will not release further
nationwide condition reports for another couple of months.
But some of the major growing states release their own monthly
data in the interim, including top-ranked Kansas, which will publish updated
data later on Monday.
The poor condition of US winter wheat crop, which entered
dormancy with its lowest ratings on record thanks to Plains dryness, has been a
major focus for investors."
"Concern over the condition of the US hard red winter wheat
crop is providing a level of support," Dr Mark Welch at Texas A&M
"Information received from state reporting agencies of
improving or deteriorating wheat crop conditions will provide important information
for my price outlook moving forward."
In early deals on Monday, investors were betting on bullish
data, helping Chicago wheat futures for March add 0.6% to $7.81 a bushel as of
08:15 UK time (02:15 Chicago time).
And, after all, they are at risk of being wrong-footed if
the condition readings do turn out bad.
Speculators have increased their net short position in wheat - which has felt the brunt of "short
wheat, long corn/soybean" spreads - above 20,000 contracts for the first time
since May, weekly position data from the Commodity Futures Trading Commission
regulator showed late on Friday.
That makes them prone to being caught off-guard by a wave of
short-covering on bullish news.
… such as, say, further talk of dry weather.
"Since the first of the year, much of the wheat growing area
in Texas, Oklahoma, and the eastern two-thirds of Kansas have received a half
an inch or better of precipitation," Dr Welch said
"This is enough to sustain a crop but most of these areas
remain in extreme or exceptional drought."
And the outlook on the weather front is mixed.
"By Tuesday morning a strong new arctic cold front will be
slashing its way through the upper and central Plains bringing with it moderate
rains - 60% coverage of 0.25-1.00 inch - and even some thunderstorms to the
eastern upper Plains and western Corn Belt," WxRisk.com said.
But Kansas and Oklahoma did not feature on the list of
states in line for moisture.
Meanwhile, "the six-to-10 day outlook looks quite dry for
all of the Plains and the Midwest regions", the weather agency added.
'Slightly ahead of
Then there is the pick-up in US exports to factor in, with
sales in the latest week reaching 647,500 tonnes, the USDA said on Friday, a
figure well ahead of market expectations.
"In contrast to the corn market, wheat export sales are slightly
ahead of pace to reach USDA's marketing year target," Dr Welch said, although
not all commentators were quite so upbeat.
Brian Henry at Benson Quinn Commodities said: "Continuing
the current pace of wheat exports would allow expectations to be met, but
exports will have increase to cut into ample supplies."
In fact, shipments of hard red winter wheat, the type traded
in Kansas, have not been quite as positive as those of soft red winter wheat,
as traded in Chicago, or the spring wheat traded in Minneapolis.
'Beginning to become
Meanwhile, abroad, there has been talk of Russia, usually a
major exporter, turning importer of European Union supplies, after running down
its own exportable surplus.
Not that the EU has that much to spare.
"Feed wheat in northern Europe is beginning to become scarce
and there was talk last week of French feed wheat being shipped into the region,"
traders at a major European commodities house said.
"In fact, wheat is still disappearing out of the EU at a
steady rate and, even on the USDA's figures, there will be little more than
three weeks' supply left at the end of the season."
'Not bode well'
That does not mean just support for wheat prices, but for
those of other feed grains too, the traders adding flagging the prospect of "an
even bigger swing to using more cheap corn
from either the Black Sea or Brazil".
And wheat's price performance was one help to corn futures,
even though some of the thinking on fundamentals for the grain has deteriorated
a little with soft US ethanol (as made from corn) production data of late, and
weak export sales too.
Furthermore, data late on Friday showed the US feedlot
population down 6% year on year to 11.2m, a figure below expectations, with
placements falling rather than showing the increase that investors had forecast.
"The decline in cattle inventories does not bode well for
increased feed grain demand," Mr Henry said.
SA weather outlook
Corn for March was nonetheless pulled 0.5% higher to $7.24 a
And soybeans rose
too, by 0.3% to $14.46 ½ a bushel, despite no apparent further deterioration in
the outlook for South American weather.
WxRisk.com said: "Both the GFS and the European weather
models keep the next five days over south eastern Brazil, Paraguay, and
northeast and Argentina quite dry," an outcome which would be helpful to
But both models "are in pretty strong agreement will shift
southward in the six-to-10 day outlook, bringing some rains into all of south eastern
Brazil", not so helpful to prices, even if it looks as if dry weather will
return after that.