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Morning markets: Wheat futures extend rebound. But key data loom

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Pre-Wasde trading days are often calm affairs, with investors having already positioned for what they believe the benchmark US Department of Agriculture report will show.

 

But not this time.

 

The big question was whether the surge in wheat prices would last into another session.

 

And with that answer to that “yes”, other grains got a lift too, helping the Bcom ag subindex into its first marked foray since February above its 100-day moving average.

 

Prices surge

If last week was all about corn futures, and their gains following the unexpectedly low US acreage figure, this one has been all about wheat (so far).

 

Chicago soft red winter wheat futures for September gained a further 0.8% to stand at $5.20 ½ a bushel as of 10:30 UK time (04:30 Chicago time), building on its surge in the last session, and taking gains for this week (month, quarter) to 6%.

 

Kansas City hard red winter wheat for September gained 0.9% to $4.61 a bushel.

 

The headway has been broadly attributed to weakened expectations for a number of northern hemisphere crops, with France producing a lowball crop estimate, the UK a downbeat acreage number, and some modest downgrades to Russian and Ukraine harvest hopes.

 

Argentina factor?

Not that all commentators are so convinced that such a factors are all that is involved.

 

Tobin Gorey at Commonwealth Bank of Australia said that “the search for explanations is ongoing. And a number of explanations have been offered.

 

“Most of them, in our opinion, do not stand up to even cursory validation.”

 

Some of them “are clearly old news, or they fail to explain why US prices were up so much more than prices elsewhere.”

 

He suggested that a cocktail of issues could be involved, factoring in too “further rumblings from Argentina that the government is looking to, somehow, stick its oar deep into the wheat (again).

 

“Argentina’s growers might cut their wheat planting substantially as a result,” although it is really dry weather which is being mentioned as a threat to Argentine wheat area for this year, behind for instance a cut by the Rosario grains exchange to 18m-19m tonnes, from 21m-22m tonnes, in its harvest estimate.

 

‘US haircut’

Then there is the US itself, where harvest forecasts are on the wane too.

 

“Expectations are that the US all-wheat production estimate could see a haircut in Friday’s” Wasde, said CHS Hedging.

 

“Spring wheat planted acres are expected to be trimmed back from the March plantings estimate.”

 

And there are some ideas of a retreat too in winter wheat production ideas.

 

To restate comments from Richard Feltes at RJ O’Brien, “we continue to hear poor wheat yields in south Russia and north Kansas.

 

In the Wasde, “wheat watchers suspect” a downgrade in the hard red winter wheat harvest estimate “well above 11m bushels indicated in average trade guess” ahead of the report.

 

And certainly, there is some technical cause for buying too, with the Chicago September lot soaring not just above the key $5.00-a-bushel mark in the last session, but for instance the 23.6% retracement mark important for Fibonacci followers, ending close to the 38.2% (which it rose above on Thursday).

 

‘Already toast’

Wheat’s headway helped corn futures too, although with Midwest weather remaining key here too, and some idea of further short-covering ahead of the Wasde.

 

“The key down the road is of the ridge and hot temperatures return later this month,” said Mike Mawdsley at First Choice Commodities, in Iowa.

 

“If so, that would put a one-two punch on crops that are already stressed.

 

“I am hearing some [crop on] sandy ground is already toast, and that’s before it even pollinated,” with pollination a particularly heat-dryness tested process.

 

Corn futures for September gained 1.4% to $3.51 a bushel, with the best-traded December lot up 1.3% at $3.58 ¾ a bushel.

 

‘Concerns about crop stress’

And soybeans gained too, adding 0.7% for August to $8.98 ½ a bushel, and 0.7% to $9.03 ½ a bushel for the new crop November lot – breaching the $9.00-a bushel mark again.

 

(The real test for this contract, though, seems its 200-day moving average, at $9.12 ¾ a bushel.)

 

CHS Hedging noted “concerns about crop stress from weather forecasts suggesting hot/dry conditions for the balance of July”.

 

Soymeal offered support too, adding 0.7% to $295.80 a short ton for August.

 

Data later

Key later, of course, will be USDA export sales data for last week, expected at 300,000-800,000 tonnes for old crop soybeans, and 400,000-1.00m tonnes for 2020-21.

 

For corn, sales are expected at 300,000-600,000 tonnes for this season, and 150,000-500,000 tonnes for 2020-21.

 

And for wheat, for which 2020-21 has already begun, sales are expected at 200,000-550,000 tonnes.

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