Grain Spreads: Wheat Leads

Sean Lusk General Commentary


Wheat continues to be the grain sector leader.  Paris milling wheat hit new highs overnight. La Nina rains in Australia are said to have hurt crop quality into harvest. This comes just as farmers were set to head into the fields and pull off a bumper harvest, heavy rain battered crops across major growing areas. Therefore Australian wheat was up $10 to $15 per ton as well.  Weather issues in not just Australia but around the world are aiding many wheat classes at the moment.  Drought is expanding in the US HRW area and regions of the Ukraine and Russia needs rain.  In my view as long as milling wheat futures remain in tight supply in the global export market, wheat will continue to be the leader and sharp breaks will most likely be bought by end users. HRW or KC futures extended a rally to nine-year highs after USDA’s latest weekly crop condition ratings showed unexpected deterioration in the winter wheat crop. USDA late yesterday reported the winter wheat crop condition at 44% “good” or “excellent” as of Nov. 21, down from 46% the previous week. Analysts expected the rating to hold at 46%. Wheat rated “poor” or “very poor” rose to 22% from 20%. Weekly ratings are very subjective here in the US. March is now the most actively traded contract and if one is to long the market at these lofty levels, I would focus on March or May22 contracts. Call me with questions or to discuss a game plan.

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