Commentary
The rally in wheat specifically the KC and Minneapolis contract comes on three fronts. First, concerns in Eastern Europe. Debate continues to what Russia will do with its “halt” wheat export comments in my view. Lots of noise coupled with small tactical nukes being moved into Belarus. The market in my opinion is at least respecting the idea that Russia will put a $275/ metric ton floor on its wheat offers. Russian FOB values just below $275/mt yesterday. With a Russian “floor” the motivation to sell futures subsides in my opinion for now. Second, individual state crop conditions ratings released last night showed modest improvement in the HRW wheat crop during March. The “good” to “excellent” ratings for HRW wheat stood at 19% in Kansas (unchanged from the end of February), 34% in Oklahoma (down two points), 18% in Texas (down one point), 28% in Colorado (down one point), 22% in Nebraska (up three points), 22% in South Dakota (down one point) and 31% in Montana (up 10 points). Number one wheat producer Kansas posted a 52% poor/very poor rating with subsoil moisture at 77% short/very short. Weather is key now as the crop comes out of dormancy. Moisture is needed. Third we have pre report positioning ahead of Fridays planting intentions report. Acreage guesses from the analysts came in yesterday for Friday’s 11am (CST) report. The numbers released Friday will reflect farmer intentions as of March 1st, which then starts the debate on whether conditions will allow them to realize their intentions. There’s plenty of time before crops need to be in the ground over much of the Midwest, although producers in the northwestern belt know that it’s going to take a lot of time to melt the heavy snowpack. That could make corn planting a challenge, but it also presents a challenge for spring wheat as well. The Average trade guess shows the analysts are looking at 48.9 million acres of All Wheat vs 45.75 last year. The Ag Forum placed the all-wheat acres number at 49.5 million. Spring wheat ATG was put at 10.95 million vs 10.84 last year. Kc wheat has staged a 90-cent rally from the early March lows. Chicago currently has bounced 47 cents while Minneapolis approximately 70 cents. Funds are short the volume heavy Chicago contract by 80K contracts, as short covering the last few weeks featured as funds covered about 20k. Some of the short by funds has been built vs a long in KC wheat. Chart below. KC/Chicago extremely over bought here in my view. I would possibly anticipate some selling of this spread into report. No trade recs yet.
Trade Ideas
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Risk/Reward
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