The great unknown in wheat on what this years winter wheat crop is or isn’t, drove KC wheat higher in my view. The overnight trade with Chicago wheat in tow followed by a brief rally in Minneapolis. As harvest moves North from Texas into Oklahoma, producers in some areas are finding a crop that has been decimated by drought. While much of the weather issue is a known, the last six weeks of crop condition reports haven’t shown a modest increase in the good to excellent rating where arid desert like conditions continue in Texas, Oklahoma, and parts of Kansas. The fear or unknown is again reviving funds into KC and Chicago contracts again at the expense of corn and beans. Lower wheat crops out of China, disappointing rains in Australia, and lower production from Russia and and the Black Sea have held the Chicago contract at bay vs KC. While KC put on a slight gain to settle at 20 cents over Chicago, both contracts are essentially running in tandem. Minneapolis wheat following some early delayed spring planting issues has come back with the crop in and in good shape according to weekly condition reports. For now it’s acting as tail of the dog following KC and Minneapolis. If Kc can take out 551, with a close over, it can challenge 562 and then the old highs at the 574-77 level. That would most likely mean it would gain on corn. There is a double top in KC wheat vs corn basis July futures at 1.66 over with today’s settle at the 161.4. The next level If what keeps pushing higher is 1.96 Kc wheat over, last years high corresponding with the Kc wheat high of 623 on (7.17.17). A close under 5.10 basis July KC could push the market down to 4.86. This would push the Kc wheat/corn spread to a 1.16.
Corn and beans are being liquidated as the crops are in the ground amid less threatening weather in the Midwest with a lack of heat for now and enough moisture. Make no mistake its not the same everywhere but then again it never is. Fund liquidation could still push corn to 3.76 and then 3.72 basis July. Beans look to push between 986 and then 982 prior to next weeks report. I suspect there may be some short covering ahead of next Tuesday’s crop report at 11 am. Resistance is at 10.20 and 10.38. Nov 18/19 bean spreads have fallen from a 56 cent inversion down to 23 cents today’s settle. If one gets the chance, if beans hold the 9.86 trend line support, to buy this spread into the report with the potential for a move to 30 cents Nov 18 over. The key ultimately for beans in my view will be if this heat dome and drought that has plagued the SW hard red winter wheat areas for months on end moves in the Midwest in July. With lower crop sizes out of South America as a whole, funds will easily put on 1.50 in beans and 40 handles in meal with a weather rally. If weather stays optimal downside targets are the yearly low at 9.45 and then last years low at 9.03. Sizable bets are being made at this time in my view for both scenarios.
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