After sliding most of the week, wheat futures closed Friday with most contracts finding gains ranging between 3% and 4% after a round of bargain buying, but still closed down 6.3% for the week. Ukraine’s 2022 wheat harvest is 91% complete, the Russian invasion has created some ongoing challenges, especially in the east and south. Ukraine’s total grain harvest could fall around 23% below 2021’s record-breaking numbers.
The price direction will depend on how much wheat and corn actually comes out of Ukraine in the coming weeks.
The USDA’s last month release of the June 30 Acreage report all-wheat acres firmed 1% higher from last season, with 47.1 million acres fueled the previous selling.
Wheat Futures Highlights
- CBT SRW futures were back up by 19 to 22 cents on Friday. September was still a net 52 3/4 cents lower wk/wk.
- KC HRW futures rallied back 25 to 32 1/4 cents on the day, but still closed 44 1/2 cents below last Friday in the Sep contract.
- Spring wheat ended Friday’s session 21 to 22 1/4 cents higher in the front months with Sep going home 44 3/4 cents weaker wk/wk.
- Preliminary volume estimates were for 73,811 CBOT contracts, which is moderately lower than Thursday’s final count of 118,808.
Wheat Technical Outlook
KnovaWave analyze US Wheat futures given its high beta relationship and more liquid aspect as an investment vehicle.
Wheat held after it threatened its weekly cloud and 0/8 which held. Last fortnight it spat the 50wma. In a chopper week it closed under the 61.8%. The contract stabilized after it continued its sharp impulsive collapse fueled from when it retested and broke the Tenkan (orange). This came about after a failure at retesting the 8/8 move and high after it spat 8/8, and the minimum target. It had completed a measured 4/8 correction off highs then broke key support at 38% then 50% and 50wma confluence in the freefall. From here Wheat support at that $700 cloud confluence with the breakup level at 61.8% resistance, then Kijun and Tenkan.
USDA August WASDE
USDA slightly raised its estimates for all-wheat yield by 0.2 bushels per acre to 47.5 bpa this month. Supplies also saw a modest increase, moving 2 million bushels higher to 1.783 billion bushels. Export estimates for 2022/23 improved 25 million bushels to 825 million after winter wheat prices are seen as more competitive after falling from multiyear highs earlier this spring. (The season-average farm price tumbled $1.25 from a month ago to $9.25 per bushel.)
WAOB Corn Stocks
The world balance sheet saw some shifting around, with smaller US stocks. Carryout was down just 0.18 MMT to 267.34 MMT. Russian wheat production was up 6.5 MMT to 88 MMT, which took stocks 2.75 MMT on larger exports and use. EU production was down 2 MMT, with Ukrainian stocks down 1 MMT.
Wheat Acreage Highlights
All-wheat acres firmed 1% higher from last season, with 47.1 million acres. “If realized, this represents the fifth lowest all-wheat planted area since records began in 1919,” USDA notes. Here’s a closer look at the acreage breakdown:
- Winter wheat – 34.0 million acres (up 1%)
- Hard red winter wheat – 23.5 million acres
- Soft red winter wheat – 6.86 million acres
- White winter wheat – 3.61 million acres
- Spring wheat – 11.1 million acres (down 3%)
- Durum wheat – 1.98 million acres (up 21%)
Wheat stocks eroded 22% lower from a year ago, meantime, to 660 million bushels. That was slightly higher than the average trade guess of 655 million bushels. Of the total, 93.0 million bushels are in on-farm storage (down 34% year-over-year), with the remaining 567 million bushels stored off the farm (down 19% year-over-year). Disappearance between March and May totaled 364 million bushels, which was down 22% from the same period last year.
Effect of Higher Input Costs on Farmers
A recent report by the Agricultural and Food Policy Center (AFPC) at Texas A&M University shows higher input prices are having a larger impact on farmers than originally thought.
- Net cash farm income on the representative feed grain and oilseed farms is projected to decline by an average of $534,000 from 2021 to 2022 across the 25 feed grain and oilseed farms.
- Representative wheat farms face an average reduction in net cash farm income of $399,000.
- Representative cotton farms face an average reduction in net cash farm income of $716,000.
- Rice farms face the largest reduction in net cash farm income per farm at $880,000 and a per acre reduction of $442.
Compiled by Joe Outlaw, Ph.D., and Bart Fischer, Ph.D., co-directors of the AFPC.
Global Wheat Output
The International Grains Council raised global wheat output by 8 MMT to 778. That is still down from 781 MMT in 21/22. Wheat carryout stocks were upped by 3 to 275 MMT – still under 280 last season.
USDA export estimates for 2022/23 improved 25 million bushels to 825 million after winter wheat prices are seen as more competitive after falling from multiyear highs earlier this spring. (The season-average farm price tumbled $1.25 from a month ago to $9.25 per bushel.)
Saskatchewan’s wheat harvest reached 5% complete, compared to their 8% average pace and 20% last season when drought speeded things up.
Russia’s agriculture ministry announced today that it would downgrade its current forecasts for 2022/23 wheat exports of 1.837 billion bushels if production fails to reach a target of 4.777 billion bushels. That’s certainly possible, given a late start to the season due to cold weather, which is now leading to a slower than usual harvest.
“Of course, we will supply our [domestic] market in full, there will be no problem with that. But if the planned volumes are not achieved, we will have to revise our plans to export 50 million [metric] tons,” according to agriculture minister Dmitry Patrushev.
Ukraine’s 2022 wheat harvest is 91% complete, with a production of around 639.3 million bushels, according to grain traders union UGA, which added that the Russian invasion has created some ongoing challenges, especially in the east and south. Ukraine’s total grain harvest could fall around 23% below 2021’s record-breaking effort.
EU Soft Wheat Production
European Union grain trade association Coceral raised its soft wheat production estimates to 5.254 billion bushels, citing improved weather in Spain. The group also slightly raised its estimates for French soft wheat production, which is in contrast to some other forecasts because the country has recently been suffering through ample hot, dry weather.
France’s farm ministry made upward revisions to its estimates for 2022 soft wheat production, moving it to 1.245 billion bushels. If realized, it would still be moderately below last season’s production, due to fewer planted acres this season. Yields are estimated at 107.2 bushels per acre. France is Europe’s top grain producer.
French farm office FranceAgriMer reports that 100% of this season’s soft wheat has been harvested through August 1, up from 95% the prior week. And 99% of the country’s spring barley harvest is also complete, up from 92% a week ago.
The BA Grain Exchange reduced its estimate of Argentine wheat area again, by 100 K hectares to 6.1 million and are now down ½ million from a late May forecast.
A devastating heat wave this spring has tanked Indian wheat prospects after five years of bumper crops. Private wheat exports from India were banned in mid-May to ensure domestic availability.
India’s ag attaché cut the wheat crop there to 99 MMT. This is 7 MMT below the July WASDE and shaves exports by ½ MMT to 6 million.
Global Wheat Importers
Egypt is the world’s top wheat importer and sources a large percentage of its supplies through Ukraine.
Egypt’s purchase total from yesterday’s tender results was increased from 640 to 760 K, from French and Russian suppliers.
Earlier in the month Egypt’s Supply Minister Aly Moselhy said in a news conference on Sunday the country has strategic reserves of wheat sufficient for 5.7 months, He added that the country has procured 3.9 million tonnes of wheat in the local harvest so far.
He added that the strategic reserves for sugar were sufficient for more than six months and those for vegetable oils are sufficient for 6.2 months, while the country is self-sufficient for rice for 3.3 months. The country is a significant importer of all these commodities.
Pakistan has received multiple offers in its international tender to buy 18.4 million bushels of milling wheat, which closed earlier today. Additional details about the sale were not immediately available.
South Korean feed mills purchased 4.4 million bushels of animal feed wheat, likely sourced from Australia, in recent private deals without issuing an international tender. The grain is for shipment between mid-October and mid-December.
Japan will import nearly 500,000 bushels of feed-quality wheat for livestock use following a simultaneous buy-and-sell auction that was held earlier today. The country’s agriculture ministry had initially sought up to 2.6 million bushels of feed wheat and 1.8 million bushels of feed barley in today’s SBS auction. The grain is for arrival in Japan in late January.
The Philippines likely passed on all offers for its tender to purchase 5.5 million bushels of wheat., with prices regarded as too high. One trader suggested the country may wait to see if an uptick in Ukrainian exports will help prices fall. Ukraine’s total grain exports are down nearly 49% so far in the young 2022/23 marketing year.
COT on Commodities
For the week ending on August 16th.
- Weekly CFTC data revealed Chicago wheat spec traders reduced their net short by 2,241 contracts to 18,107 through the week that ended 8/16.
- In KC wheat, the funds added slightly more new shorts than longs through the week for a 503 contract reduction to their net long.
- Managed money was 7,520 contracts net long HRW as of 8/16.
- Spring wheat spec traders were less net short by 258 contracts to 757 by covering a few shorts through the week.
Commodity Round Up
- The Bloomberg Commodities Index declined 0.7% (up 23.3% y-t-d).
- Spot Gold dropped 3.1% to $1,747 (down 4.5%).
- Silver sank 8.5% to $19.05 (down 18.3%).
- WTI crude declined $1.32 to $90.77 (up 21%).
- Gasoline dipped 0.9% (up 35%)
- Natural Gas jumped 6.5% to $9.34 (up 150%).
- Copper was little changed (down 18%).
- Wheat dropped 6.3% (unchanged),
- Corn fell 3.0% (up 5%).
- Bitcoin sank $2,880, or 11.9%, this week to $21,280 (down 54%).
Risk markets continue to respond to the war in Ukraine and the supply crisis from the Coronavirus outbreak and lockdowns.
From The TradersCommunity Research Desk