It's usually pretty easy to find something bullish in the wheat market. It's a global commodity, and chances are good that there's trouble brewin' someplace around the planet at any given time. But talk is cheap in wheat, because there's usually plenty of it. Mounting a real rally is more difficult.
Prices typically try to carve out a bottom in December, firming to the January USDA reports, when the agency publishes its first estimate of winter wheat seedings as well as updating old crop supply and demand. The December crop report, due Dec. 10 this year, typically doesn't generate much buzz and this year is likely to be no exception, at least domestically. Exports are running better than forecast, which could cause a small reduction in carryout, maybe 10 million bushels.
Wheat looks for spark to light fire
USDA's world numbers could be more interesting, with a lot of uncertainty among major producers. Australia's government raised its forecast of production, around 40 million bushels more than USDA, something of a surprise given the troubles faced by producers in the eastern part of the continent. Argentine production, on the other hand, looks lower.
But most of the market's uncertainty revolves around crop that will be harvested in 2014. China's major wheat growing region remains too dry, which should keep imports from the U.S. and Australia active after the poor 2013 crop. The Black Sea is always boom and bust on production. Earlier this fall it appeared bust might be the order of the day, when rain delayed seeding. Growers mostly caught up, shifting the focus to winterkill.
A cold blast this week could harm the hard red winter wheat crop on the western Plains, with the threat depending on how much snow falls ahead of the arctic front. But major states only report conditions once a month over the winter, making any assessment difficult, even if the crop raters could tell.
Strong basis for old crop wheat and tight carry means old crop should be down to a few gambling stocks if that. Most of the marketing focus should be on new crop, but rallies should take time to get going. July futures are starting to drift back towards crop insurance base prices, allowing hedging of bushels above the guarantee. We recommended 10% previously, and plan on another 10% by mid-January.
Download the complete Weekly Wheat Review report using the link below.
Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.
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