Wheat prices surged on Friday $0.54-$0.60/bushel with short covering and a continual bounce in risk assets. Wheat exports rose 19% from last week’s volumes to 10.5 million bushels through the week ending June 30 also fueling futures. Chicago futures are now trading just under the $9/bushel benchmark while Kansas City futures soared over that benchmark Friday. Minneapolis futures are just under the $10/bushel benchmark. Western hemisphere and Asian buyers continued to be the top purchasers of new U.S. wheat export sales last week.
Wheat prices recovered 6% this week after falling over 20% over the last fortnight and down over 50% from the pandemic break up. The USDA’s last Thursday morning 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 recovered 6.0% (up 16% YTD)
- July CBOT wheat had a $1.00 trading range and closed up 48 cents.
- Minneapolis wheat had a $1.15 trading range and closed up 37 cents
- KC wheat had a $1.15 trading range and closed up 40 cents.
Wheat Technical Outlook
KnovaWave analyze US Wheat futures given its high beta relationship and more liquid aspect as an investment vehicle.
Wheat actually performed the strongest of the grain complex, the only one to not threaten its weekly cloud. Wheat spat the 61.8% and closed right at the 50wma which it broke the week prior. 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 $800 confluence with the breakup level at 61.8% and the cloud finally showed some resolve. Resistance at 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
- Hard red winter wheat harvest nearly 30% complete as it moves north into the Central U.S.
- Harvest is largely finished in Texas and Oklahoma, with only about 13% left to go in top producer Kansas.
- Nebraska’s crop is 25% harvested while Colorado’s harvest is 12% complete.
- Test cutting will likely begin in Wyoming and South Dakota in the next week to 10 days.
Crop conditions are holding mostly steady, though heavy wind and hail in South Dakota this past week likely damaged crops. Yields in the Southern Plains continue to average between 20-30 bpa. Preliminary reports from harvest progress in Nebraska point to more favorable yields (50bpa for dryland and 100bpa for irrigated).
- Soft red winter wheat harvest is nearly 85% complete, even though scattered showers have caused rain delays in the Midwest over the past week.
- Crop conditions are in good shape, with 57% of the crop rated as good to excellent in Monday’s Crop Progress report.
Test weights are trending higher than last year. Harvest progress should continue at a steady clip over the next week as dryness settles into the Eastern half of the country.
- Soft white winter wheat crops in the Pacific Northwest are nearly completely headed.
- Spring crops continue to lag 2-3 weeks behind historical paces but are largely rated in good to excellent condition across Idaho, Oregon, and Washington.
Hard red spring wheat crop development also continues to lag behind average paces due to a slow start to spring in the Northern Plains. But even with the late start and delayed crop development, USDA reported 64% of the spring wheat crop to be in good to excellent condition last Monday. Rains in the Northern Plains through the weekend should keep those condition ratings high.
Durum crops are also developing late this year. But overall crop development remains favorable. Condition ratings in North Dakota and Montana stand at 88% and 66% good to excellent as of last Sunday.
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.
Two French groups (Arvalis and Intercereales) have lowered their estimates for average wheat yields to 103.3 bushels per acre. That would be 3% below the prior 10-year average, if realized. This season’s harvest is just getting started, with farm office FranceAgriMer estimating that progress has reached 5% through June 27, adding that 64% of the crop is rated in good-to-excellent condition (steady from a week ago).
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.
Egypt has contracted to buy 180,000 tonnes of wheat from India, Supply Minister Aly Moselhy said in a news conference on Sunday. Shipment will happen once the cargo “reaches the ports” in India, Moselhy added.
India likely shipped a record-setting 367 million bushels of wheat this year, with much of that volume recorded following Russia’s invasion in Ukraine. At the moment, the country is not expected to restrict rice exports.
Global Wheat Importers
Egypt is the world’s top wheat importer and sources a large percentage of its supplies through Ukraine.
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.
Commodity Round Up
- Bloomberg Commodities Index declined 1.0% (up 16.9% y-t-d).
- Spot Gold dropped 3.6% to $1,742 (down 4.7%).
- Silver fell 2.7% to $19.32 (down 17.1%).
- WTI crude dropped $3.62 to $104.79 (up 41%).
- Gasoline sank 6.0% (up 55%),
- Natural Gas rallied 5.9% to $6.03 (up 62%).
- Copper fell 2.7% (down 21%).
- Wheat rallied 6.0% (up 16%),
- Corn recovered 2.7% (up 5%).
- Bitcoin rallied $2,300, or 11.8%, this week to $21,900 (down 53%).
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