Wheat futures fell Friday after the USDA WASDE report slightly raised estimates for all-wheat yield by 0.2 bushels per acre to 47.5 bpa this month. Supplies 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. Two more ships carrying wheat and corn set sail from Ukrainian ports earlier today, which brings the total number of cargo ships navigating through the Black Sea up to 14 so far this month.
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
- Wheat prices were unable to find any positive momentum on Friday, with most contracts closing around 0.75% lower.
- September Chicago SRW futures dropped 6.25 cents to $8.0450,
- September Kansas City HRW futures eased 1.75 cents to $8.8750,
- September MGEX spring wheat futures fell 6.25 cents to $9.1550.
- Dec 22 CBOT Wheat closed at $8.22 1/2, down 3 3/4 cents,
- Cash SRW Wheat was $7.52 3/4, down 4 7/8 cents,
- On Thursday, commodity funds were net buyers of all major grain contracts, including CBOT wheat (+3,500).
- Preliminary volume estimates were for 98,671 CBOT contracts, tracking moderately lower than Thursday’s final count of 124,531.
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.
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
- The Wheat Quality Council wrapped up their spring wheat tour and estimated the North Dakota spring wheat crop at the second highest on record.
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.)
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.
Two more ships carrying wheat and corn set sail from Ukrainian ports earlier today, which brings the total number of cargo ships navigating through the Black Sea up to 14 so far this month. This was the first instance of wheat being shipped, with around 112,000 bushels bound for Turkey. Another vessel contained 2.4 million bushels of corn and is bound for Iran.
Meantime, a Turkish grains trading company is denying allegations that flour and barley in a ship docked in Lebanon was stolen from Ukraine. A company official said Lebanese customs were supplied with documentation showing the grain was sourced from Russia but declined to share these documents with Reuters.
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.
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 9th.
- In CBT wheat, they added 5,378 contracts to their net short position as of Tuesday to 20,348 contracts.
- In KC, they trimmed 1,969 contracts on the week to 8,023 contracts.
- In MPLS wheat net sellers with the net short position up 363 contracts to 1,015 contracts.
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