Wheat Weekly Comments May 12

Wheat Weekly Comments May 12

To start the week, wheat opened the overnight session mixed with Mpls steady while the winter wheat exchanges were higher. By 2 AM all of the wheat exchanges were pushing higher with most of the support being tied to technical buying and fund short covering. All three wheat exchanges put in daily reversals as well as weekly reversals last week, which has all three exchanges testing the 50% retracement level (from recent high to low levels). Light support continues to come from the lack of confidence in the Black Sea Grain initiative being renewed. Russia continues to make it clear that they do not want the agreement extended and has stopped registering vessels, which is turn ends the project. Support in KC is coming from harvest acreage concerns. In 104 years, the average abandonment in KS has been 11.6%. This year the expectations are 25%, just slightly below the highest ever reported, 25.4% in 1996. Light support for Mpls came from the 1 to 5 day forecast that is calling for above too much above normal precip, which if realized could keep producers out of the field for the next week to 10 days.

On Tuesday wheat opened the overnight session mixed with only KC higher but by the end of the night session Mpls was posting gains as well. Early support in KC came from expectations that Friday’s report will show a much larger than expected decline in harvested acreage due to abandonment. Mpls were supported by a lower-than-expected planted acreage estimate. Chicago was the sell side of spread trading today. Stats Canada’s stocks estimate was friendly wheat as inventory was much lower than expected. All wheat stocks were at 13.26 MMT vs expectations of 14.0 MMT and vs 11.22 MMT last year. Durum stocks were estimated at 11.46 MMT vs expectations of 12.0 MMT and vs 9.2 MMT last year. The higher close in KC and Mpls was friendly as they were able to hold gains in the face of heavy losses in Chicago.

In Wednesday’s session wheat opened the overnight session steady to lower and then proceeded to extend session losses throughout the night. Early selling was tied to the lack of demand and forecasts calling for rain for the Southern Plains. Selling was also tied to reports that the UN has resumed inspecting vessels at the Black Sea. But once the day session started, wheat trimmed session losses and turned to trade mixed throughout most of the day session. KC was supported by expectations that Friday’s report will show a larger abandonment and lower production than expected. Spring wheat was supported by slow planting progress and the likelihood that planting activity will not resume until next week due to rain delays.

On Thursday wheat opened the session lower and extended session losses into the day session and then just stalled as traders wait for the next big news to give the market direction. The next big thing will likely be Friday’s USDA Crop Production estimate. Light selling pressure was due to this morning’s disappointing old crop export sales estimate, but that was somewhat overshadowed by a strong new crop export sales estimate of over 333 TMT. Year to date new crop sales is at 60 MB vs 89 MB last year at this time. The potential surprise for wheat in Friday’s report could come in the harvested or abandonment acreage. Reports out of OK and KS has abandonment at record high levels, and that should be reflected in USDA’s harvested acreage estimated and winter wheat production number.

Early estimates for Friday have all wheat production at 1.789 BB vs 1.65 BB last year. Winter wheat production is estimated at 1.23 BB vs 1.104 BB last year. Old crop ending stocks are estimated at 603 MB vs 598 MB last month. New crop ending stocks are estimated at 602 MB vs 598 MB last year.

July Mpls wheat support is at $7.85 while resistance is at $8.50. Sept Mpls support is at $7.80 while resistance is at $8.50.

For the week, July MW was at $8.46 up 10.0 cents, Sept MW was at $8.4825 up 8.5 cents, July Chicago was at $6.35 down 25.25 cents, and July KC was at $8.77 up 44.0 cents.