Wheat prices faltered again this week continued to slide lower, with some contracts down nearly 2% Friday. September MGEX spring wheat futures lost 15.75 cents to $9.1225. On Thursday, commodity funds were net buyers of CBOT wheat (+9,000) contracts. Wheat felt the pressure from the Ukraine and Russia deal brokered by the UN. 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.
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.
- September Chicago SRW futures faded 5.25 cents to $8.1175,
- September Kansas City HRW futures dropped 10 cents to $8.7975
- September MGEX spring wheat futures lost 15.75 cents to $9.1225.
- On Thursday, commodity funds were net buyers of CBOT wheat (+9,000) contracts.
- Preliminary volume estimates were for 89,195 CBOT contracts, shifting moderately above Thursday’s final count of 63,331.
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 at 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.
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.
Wheat Exporters
USA
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.
Russia
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
Ukrainian President Volodymyr Zelenskiy made a rare trip outside of Kyiv earlier Frida, visiting a port near the southern city of Odesa. Black Sea ports are still waiting to move grain after the United Nations brokered a deal earlier this week to get container ships moving again. Reports show that 17 ships are currently docked at Ukrainian ports, holding an estimated 600,000 metric tons of cargo.
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
French farm office FranceAgriMer reported that 95% of this season’s soft wheat crop has been harvested through July 25, up from 84% a week earlier. And 63% of the crop is rated in good-to-excellent condition, unchanged from a week ago.
Argentina
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.
India
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
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
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
South Korea purchased 1.5 million bushels of milling wheat, sourced from Canada, in an international tender that closed earlier today. The grain is for shipment between mid-October and mid-November.
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
Commodity Round Up
Risk markets continue to respond to the war in Ukraine and the supply crisis from the Coronavirus outbreak and lockdowns.
Source: TC, USDA, Farm Progress, Reuters
From The TradersCommunity Research Desk