Wheat prices faltered again this week losing 2.3% to be down 2% on the year. Wheat felt the pressure from the Ukraine and Russia deal dropping between 40 and 50 cents across all three classes Friday. The deal is for the black sea reopening with Ukrainian wheat, a possible bottleneck in ramping up Ukraine grain exports is damage to the transportation infrastructure which in reality will take time to fix. French wheat tumbled nearly 70 cents on the port agreement.
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
- Wheat fell this week fell 2.3% to be down 2% on the year.
- Chicago Wheat dropped to $7.64 ¼, down 42 cents on the day.
- September KC Wheat settled at $8.20 ¼, down .40 ¼ on the day
- Minneapolis Wheat dropped .40 ¾ settling at $8.72 ½.
Wheat Technical Outlook
KnovaWave analyze US Wheat futures given its high beta relationship and more liquid aspect as an investment vehicle.
After Wheat last week performed the strongest of the grain complex, the only one to not threaten its weekly cloud. This week it was the worse spitting the 50wma. Wheat was back under the 61.8% and closed right at the cloud. The contract had 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.
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.
Wheat Quality Council Tour of Kansas
The Wheat Quality Council tour of Kansas was held last month. The final state-wide average yield came in at 39.7 bushels per acre versus USDA’s May 12th estimation of 39.0 bpa and the most recent 5-year average at 47.4 bpa. While the yield came in higher than the latest forecasts, total production came in 10 million bushels below USDA’s figures due to abandonment.
The tour sees Kansas harvested acres at 88.8 percent of those planted versus the USDA’s forecast of 93.9 percent the 4-year average of 94.9 percent. With Kansas condition ratings at 54 percent Poor-to-Very Poor, the 39.7 bpa was higher than I was expecting.
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.
US Wheat Harvest Report
- Spring wheat ratings are estimated to be 1 point lower on Monday at 70% Good-to-Excellent, versus 9% last year and the 53% 5-year average.
- Winter wheat is expected to be 79-80% harvested, which is up from 70% last week and compares to 82% from last year and the 80% 5-year average.
The fall corn export outlook is by no means certain. The Hard Red Winter Wheat Belt should see 1/10 to ¾” during the period over 30% of the region. Temperatures are forecast to be above normal. Canadian Prairie rainfall for the period will vary between 1/3rd to 2” over 65% of the region with a few amounts greater. Temperatures are forecast to be near to above normal.
Wheat exports rose 19% from last week’s volumes to 10.5 million bushels through the week ending June 30. Wheat export sales reached 17.6 million bushels last week, crushing expectations which ranged from 5.5 million to 14.7 million bushels. Cumulative totals for the young 2022/23 marketing year are trending slightly below last year’s pace so far, with 33.7 million bushels.
Western hemisphere and Asian buyers continued to be the top purchasers of new U.S. wheat export sales last week.
Increases to weekly hard red winter and hard red spring shipments were the key drivers of higher wheat exports in USDA’s latest Export Sales report. Soft red wheat export volumes through the week ending June 30 were fractionally higher also and will likely trend higher in the weeks to come as harvest progress wraps up in the Midwest and Eastern U.S.
French consultancy Agritel offered a forecast for 2022/23 Russian wheat production. The group expects it to reach 3.138 billion bushels, which would be a year-over-year increase of more than 13%, if realized. Russia is the world’s No. 1 wheat exporter.
Russian consultancy IKAR increased its estimates for the country’s 2022 wheat production, moving it to 3.197 billion bushels from its mid-May forecast of 3.123 billion bushels. It also raised its expectations for Russian wheat exports to 1.506 billion bushels.
Ukraine’s total grain exports in June tumbled 43% lower year-over-year amid the country’s ongoing struggles due to the Russian invasion. Port traffic is largely non-existent, forcing Ukraine to ship goods via rail (which is much less efficient).
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.
French wheat exports for the week of July 20th tripled to 119 K with the total destined for Morocco. The French wheat crop is 84% harvested for soft and 96% for durum. Soft wheat ratings fell 1 to 63%, 2 points below the average while the durum held at 56% G/E, 8 points below average.
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 Korea purchased 4.6 million bushels of wheat sourced from the United States, Canada and Australia in a tender that closed last Thursday, approximately one-third of the total was sourced from the U.S. The grain is for shipment starting in July.
COT on Commodities
COT on commodities covering the week to July 12 saw selling pressure from hedge fund begin to ease. The net long dropped to 900k lots, lowest since June 2020 but the 52k reduction was well below the 190k average seen during the previous four weeks.
Specs turned net buyers of crudeoil, copper and sugar with selling seen in natgas gold soybeans corn wheat and coffee. The gross position (long & short) was cut by 177k reflecting a high degree of uncertainty and vacations lowering exposures
via Ole S Hansen @Ole_S_Hansen
- Bloomberg Commodities Index rallied 2.7% (up 17.5% y-t-d).
- Spot Gold recovered 1.1% to $1,728 (down 5.6%).
- Silver slipped 0.6% to $18.60 (down 20.2%).
- WTI crude dropped $2.89 to $94.70 (up 25.9%). Gasoline increased 0.3% (up 45%),
- Natural Gas surged 18.3% to $8.30 (up 123%).
- Copper rallied 3.6% (down 25%).
- Wheat fell 2.3% (down 2%), and
- Corn sank 6.5% (down 5%).
- Bitcoin surged $1,872, or 9.0%, this week to $22,732 (down 51%).
Commodity Round Up
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