Spring wheat investors
who took profits in the last session may wish they hadn't.
The rally in Minneapolis hard red spring wheat futures,
having stalled on Wednesday, rebooted to send the July contract at one point to
$6.17 ¾ a bushel, the highest in nearly two years.
While the lot fell back to close at $6.04 ¼ a bushel, that
still represented a 1.5% gain on the day, and the first close for a spot
contract above $6.00 a bushel since July 2015.
The catalyst to the rise was a fresh bout of worries over dryness
in the northern US Plains spring wheat country, including North Dakota, which
grows roughly half the US crop (usually, but maybe not this year).
'Weather fuelling the
"Weather continues to fuel the fire in the grain markets as
dry and hot conditions persist across the Dakotas and Montana," CHS Hedging
WxRisk.com said that "there is strong model agreement as to
what the data shows over the next five days.
"Temperatures greater than 95 degrees Fahrenheit (35
Celsius) with some 100 Fahrenheit (38 Celsius) plus degree readings develop on
Friday over the Dakotas and Texas, which expand into all of the Plains and a good
portion of the western Corn Belt on Saturday… Sunday… Monday… into Tuesday."
And nor is there much rain expected, for now.
"The two-week percent-of-normal precipitation map shows
large deficits across North Dakota, South Dakota, Minnesota, Nebraska, Iowa,
northern Missouri, Wisconsin and Illinois," said Tregg Cronin at North Dakota-based
Halo Commodity Company.
Not so fast.
Weather models, and interpretations of them, differ, and there
is some idea of rain relief.
This weekend, "some shower activity is expected to reach
portions of the northern Plains and far northern Midwest," benefiting crops, said
"The areas most likely to see any notable improvements are
eastern Montana and north western North Dakota."
And in the six-to-10 day outlook, the European weather model,
at least, shows "significant rains over north Minnesota, northern North Dakota
and over south central Canada," WxRisk.com said
However, rains, even assuming they arrive, may prove too
late to revive crops in some areas.
Halo's Tregg Cronin noted that some South Dakota farmers are
already cutting winter wheat wheat for hay, and may spray off spring wheat too,
and claim insurance, if it "begins to shoot heads in the next 7-10 days with the
wheat only being knee high".
Country Futures Darrell Holaday said: "The reports out of the
Dakotas continue to be dire," adding that while "there is anticipation of rainfall
next week, the heat this weekend will do additional damage".
And data on just how bad conditions are emerged with the
weekly US Department of Agtriculture's weekly drought monitor - which showed an
astonishing spread of soil moisture deficits in the Dakotas.
In South Dakota, the proportion of the state rated in
drought jumped by 30.1 points to 50.5 points.
In North Dakota, the increase was 63.3 points to 87.5%. That
is up from zero three weeks ago, and easily the highest figure since the great
US drought year of 2012.
Drought also turned up in Minnesota, although still at a low
9.7% coverage, up from zero last week.
The gains were evident in winter wheat markets too, although they also closed well below their
highs, for a few reasons.
One is that the weather for major winter wheat areas further
south in the Plains is not so bad, with MDA saying that "rains in western areas
will maintain moisture for late wheat growth, while harvesting progresses well
in southern areas".
And strong harvest brings a jump in supplies which weighs on
In fact, harvest reports continue to vary, with CHS Hedging
saying that "as harvest gets moving on winter wheat, we hear tell of decent
yields with a wide array of proteins, most on the low end".
Richard Feltes at RJ O'Brien said that he was "hearing mixed
reports on hard red winter wheat yields - very good to very poor - while western
Tennessee soft red winter wheat yields track below last year and average".
Wheat price closures
Furthermore, there is the prospect on Friday of the USDA's monthly
Wasde report – a key event for agricultural commodity markets, which can cause
big price swings, deterring some investors from betting heavily in the run up
to the briefing and often, indeed, encouraging profit-taking.
Not that this Wasde is expected to be a major one (of which
And then there is the fact that July winter wheat futures
have had a tendency of retaking their 200-day moving averages, as they did on
Thursday, only to retreat.
Kansas City hard red winter wheat close up 1.7% at $4.53 ¾ a
bushel, but well below a high of $4.60 a bushel reached earlier.
Chicago soft red winter wheat closed up 0.6% at $4.44 ¾ a
bushel, $0.11 below its intraday high.
Corn futures for
July fared even worse, settling down at $3.85 ¾ a bushel, besides being a
finish $0.06 below the intraday high.
But then the grain lacked decent US export sales last week,
of 461,000 tonnes, which wheat had, with corn export sales last week coming in
at 348,600 for 2016-17, well below expectations.
"The export sales report this was not supportive," Darrell
And on weather, it is early yet to think of dryness really
killing a US corn crop.
Furthermore, the grain stands to be more affected by the
Wasde, with an outside chance of a change to the US corn yield estimate.
That said, Tregg Cronin said that "meaningful changes to the
2017-18 balance sheet are likely to be minimal", in the Wasde, given that the
USDA "has only adjusted yields on the June report a handful of times on the
June WASDE, and usually only in the case of extreme weather.
"While dryness has been increasing the last week, not sure
it would have made it on this report."
And acreage changes are also unlikely to be made, given the
prospect of a key report on US acres ahead, on June 30.
"Of most interest to the trade will be the old crop corn
ethanol and export numbers, which could both see an increase, as well as old
crop soybean exports and crush."
'Record Chinese imports'
Soybeans for July, however, gained 0.7% to $9.30 ¾ a bushel,
with CHS Hedging saying that prices were "benefitting from record Chinese and
China said that its soybean imports last month hit 9.6m
tonnes, a rise of 25% year on year, and a record high.
This after a series of negative reports on Chinese soy
demand, with weak crushing margins seen as deterring import prospects.
Weekly US soybean export sales data were soft, but not quite
dire, at 159,100 tonnes for this season, and 221,800 for 2017-18.
And actual US soy export shipments "continue to
significantly exceed the weekly pace required to meet the USDA's mark" for
2016-17, said Louis Rose at Rose Commodity Group.
For cotton, Mr Rose
noted that US export sales (92,000 running bales this season including pima) and
shipments (324,000 running bales including pima) were "modestly lower week on
week, but well ahead of the weekly pace required to meet the USDA's 14.5m-bale
export target" for 2016-17.
Encouragingly for cotton bulls, "sales cancellations were
again negligible," extending a trend that lasted even through last month's
And export sales for 2017-18 "were again outstanding at almost
192,000 running bales".
The data helped cotton futures for July close up 1.0% at
76.55 cents a pound, its first gain in five sessions, while the December lot
added 0.6% to 73.10 cents a pound, back above its 10-day moving average.
However, bigger gains were seen in raw sugar, which added
1.4% to 14.34 cents a pound for July delivery, taking the contract more than 5%
above its 15-month low hit last week.
"The sugar bulls will point to cold weather forecasts for
Brazil this weekend and the potential for frost," said Tom Kujawa at Sucden
Financial, although it has to be noted that arabica coffee, which is particularly sensitive to southern Brazilian
frost fears at this time of year managed only a 0.5% rise to 126.35 cents a
pound for July.