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Commentary
The massive fall in wheat amid all three wheat classes the last two weeks was rapid and, in my view, attributed to the negative attitudes of tariffs and demand for US products. However, the rebuild of the fund short could continue to cause volatile action into the spring with another sharp move higher possible on any weather issues and easing of the back and forth talk on tariffs. Fund selling showing up in the COT report this afternoon with Chicago adding -17k, KC adding -18k and MGX -6k last week. The total fund short of all three wheat classes is 140K as of this past Tuesday. Even recent drought and dryness in many parts of the hard and soft red winter wheat belt, hasn’t been enough to prod funds to a significant short covering yet. That can still happen on a few fronts as we enter into a key development time of year of Spring. USDA wont’ release national condition ratings until early April, but some state-by-state ratings is out for some with mixed results. State-level winter wheat condition ratings showed deterioration in the HRW crop during February. As of March 3, good/ excellent crop ratings stood at 54% in Kansas (up four points during February), 35% in Oklahoma (up one point), 34% in Texas (down three points), 67% in Colorado (up 10 points), 23% in Nebraska (down two points), 16% in South Dakota (down nine points) and 67% in Montana (down four points). Reports from the soft red states were spotty, giving concerns that conditions for Chicago wheat were worse than previously thought in some areas. That may explain why Chicago gained 10 cents on KC wheat this week. There are several key distinctions between 2018, the last time tariffs were enacted and the current situation — balance sheets are tighter, and tariffs are expanded to Mexico, Canada and others rather than just China. Whether these are a negotiating tactic remain to be seen. Along with much of the trade we will look for some more clarity and look at updated weather and demand prior to offering a new trade recommendation.
Trade Ideas
Futures-N/A
Options-N/A
Risk Reward
Futures-N/A
Options-N/A
Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
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