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Commentary
Wheat prices had a weaker start overnight but closed higher with KC and Minneapolis leading the way. While it was just a 5-cent gain for Kc and Minny, all three classes hold near term support. The strength can be at least partly attributed to anticipation of a downgrade in Russia’s crop as their Ag Minister said this morning adverse weather and difficulties harvesting in war-torn regions have negatively affected production. Russia says it is “calculating” production from weather-impacted areas and may issue a production revision. 80% of Russia’s 2025 winter wheat crop is running less than 50% of its 30-day normal rain accumulations. Ukraine’s area of dryness has fallen, but the area that is running less than 50% of its 30-day normal rainfall is 55%. The last government update for Russia’s total grain crop was 132 million tonnes, down from 148 last year. The Ag Minister went as far as asking for citizens to visit local churches to pray for rain giving thoughts to a situation that could be worse than advertised. It is my belief that as long as the wheat market continues to have several supportive factors as in weather problems and geopolitical risks, that funds at least for now wont jump back in with an aggressive short. Trend and Index following funds have short covered the entirety of their short position with the interest waning on jumping back in for now. There was a report out this morning that a Russian missile had struck a vessel loading corn in the Ukrainian ports of Pivdenny with damage to the ship and to the cargo, but it did not sink. Once again though the reaction was muted to the news as Black Sea headlines no longer carry the weight they have had in the past. The prolonged dryness in the Black Sea and US Southern Plains will continue to keep support under the market for now in my opinion. Kc wheat chart below. Support is the 21-week moving average at 595 and then 584. A close under and its 578. Under 578 its katy bar the door to 576. Resistance is 607.4. A close over and its 626. A close over and its 638 and 642.
Trade Ideas
Futures-N/A
Options-Buy the May KC Wheat 7.00/8.00 call spread for 12 cents OB. May KC wheat at 630.
Risk/Reward
Futures-N/A
Options-Risk 7 cents on a GTC sell stop. That puts the risk at approximately $350 plus trade costs and fees. This market could catch fire maid weather uncertainties and geopolitical issues. Offer to exit at 45 cents, minus trade costs and fees,
Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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