USDA may have rained on the wheat market’s parade, but forecasts for storms on the dry northern Plains also played a role. Any precipitation now may not make much difference, especially with temperature set to rise back above 100 degrees in North Dakota. But the market may take time to heal before trying to rally again.
Increased winter wheat production, particularly in Kansas, where protein may also be better than early reports, provided one impetus for the break lower. The boost helped offset lower spring wheat and durum yields.
The agency’s global numbers were also a reminder that the world is not running out of wheat, whatever the problems are in the U.S. USDA may be too gloomy on its forecast of U.S. exports, but that trend won’t be known for a while. Sales are off to a decent start, though they slowed as the market took off.
Crops are headed down the home stretch in the northern hemisphere, with the U.S. the only real problem spot. French production is down, but that’s an old story. Yields may be a little lower than projected in Canada, though the northern Plains drought didn’t hit as hard on the Prairies.
Expect the market to start turning its attention slowly to the southern hemisphere and conditions for winter wheat seeding in the north. Argentina appears to be in decent shape but Australian rainfall over the past month is lagging. Forecasts show some showers in the east but Western Australia could stay dry. Australian futures followed the Minneapolis rally closely.
While moisture from Nebraska to North Dakota is short, most of the rest of the hard red winter wheat belt is in average or better shape. How those conditions play out will depend on forecasts that look warm and dry for August, but wetter headed into the fall.
Seasonal trends in bullish years typically keep the rally going to September, and perhaps through the fall for winter wheat. For those with weak basis, storage and year-round markets, carries from September to May in both winter wheat contracts top six cents a bushel. Those spreads are also helping elevate July 2018 contracts.
I recommended being 50% to 60% priced, along with 30% for 2018. Look to add to all those sales as the market recovers when the current washout is complete.
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Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Market Review on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat futures that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.