Wheat market reverts to sideways trading pattern, analyst says


Another choppy week of wheat trading this week saw early price action retrace much of last week’s gains, only to rise Thursday/Friday – then lose much of it late in Friday’s session . It has been difficult to maintain direction in wheat, with price action moving in a wide range over the past few weeks.

Admittedly, Russian-Ukrainian tensions explain much of the volatility, but global spot markets have slipped despite concern over disruptions from the Black Sea. Egypt bought 180,000 tonnes (TMT) of Romanian wheat this week, paying around $338/MT, down around $10/MT from its last purchase at the end of January.

Aggressive offers from the Black Sea to secure sales for nervous buyers rely on FOB offers. France has continued to lower its base in recent weeks, seeing its traditional buyers go elsewhere. Algeria historically buys French wheat, but this week bought at least 300 TMT of optional origin, much of which is expected to come from the Black Sea.

Here in the United States, FOB offers have increased which quickly took us out of the competition. Our own export sales have practically ceased. Last week’s sales totaled just 129 TMT, marking the third consecutive week of sales below 200 TMT. So far, the second half of the wheat marketing year has been a slump.

Year-to-date, market sales are 17.7 MMT, down 6.0 MMT from last year, a decline of 25%. US sales are 80% of USDA forecast, compared to a 5-year average of 89%. Corn and soybeans are both seeing export sales about 20% lower than last year, but both are ahead of schedule to meet USDA projections.

The market is slowly paying more attention to weather conditions in the southern plains as hard red winter wheat emerges from dormancy. Humidity levels are extremely tight across much of the growing region. According to the weekly Drought Monitor, most of Texas, Oklahoma and Montana are experiencing extreme/exceptional drought. Most of the remaining High Plains (Kansas, Nebraska, South Dakota, North Dakota, Colorado, and Wyoming) are only marginally better off in severe/moderate drought.

77% of Texas’ topsoil moisture is rated poor/very poor. Most of the crop is also classified as poor/very poor, so it will be a rough start to the growing season. There is still time for the rains to come, but in the south the harvest will need a drink very soon. NOAA predicts the next three months will be dry across the southern plains to the western half of the Great Plains. In fact, NOAA shows that most of the western half of the United States is experiencing some level of drought. LaNina is expected to last until May, so chances are the southern plains will remain dry well into spring. Timely rains will be essential.

The weather in South America continues in the drought pattern for southern Brazil and northern Argentina for a week or more, then widespread rains are expected to move over much of the Argentine grain belt. But those rains will come too late for much of the harvest, as significant damage has already been done to South American corn and soybean production; further downgrades are likely.

Too much rain on the Brazilian soybean crop has created quality issues and raised fears of a seed shortage for next year. Despite being in the middle of the harvest, FOB export offers from Brazil are soaring as farmers hold on to what little production they have. Soybean futures have reacted to the firming spot market around the world, and we are seeing aggressive buying from China for new-crop US soybeans when they would normally buy southern supplies. Americans at this time of year.

The expected improvement in soybean exports at this time of year will likely drive up bean prices, which will also lead to higher corn prices and, therefore, higher wheat prices in competition with corn. Planting season is expected to be another battle for acres as corn and soybeans work to protect their acreage bases.

This typically leads to higher row crop prices in early May, typically peaking around the May supply/demand ratio. Regardless of how prices move over the next couple of weeks, I expect all grains to rise in early May.


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