Wheat Falls Off Some, Market Pressures

Tanner Sheahan
CPS Tangent

Wheat has taken a bit of a dip this week with a lot of "market stuff" happening...that's a technical term.  Today wheat prices to Portland start at $7.85 right now, drop to $7.70 for July/August, and climb back up to $7.90 by the end of the year.  New crop for 2012 is at $7.39 which is not a bad outlook.  Here are a couple of Dan's commodity reports explaining some of the "market stuff."


 Gold is up, grains were stronger overnight and then hit sell pressure/ profit taking again this morning. Markets opened sharply lower, traded back to even and are now settling in with nearby corn down 9 and n/c corn off a penny or so. Wheats are the opposite with o/c wheat actually trading higher and n/c wheat futures lower (LOTS and LOTS of spread trading activity). Even though our red wheat areas are being flooded/ late plantings (up north…Red River is expected to have 2nd highest crest in last 150 years) and dry/ burning up and blowing away down south, the futures are off 4-5. Carries in the market indicate that the commercials are NOT too concerned about any shortage of supplies any time soon (S&D’s say that US will carry over very large stocks with stocks : use of 30%, 35%, 48% and 30% for HRW, DNS, SRW, SWW respectively. Again no real shortage of wheat, but a shortage of good quality wheat. An estimated 1 myn acres of Texas has burned, with some areas of Tx only rec’ing 2% of normal precip since 10/1. 100% of the state is in some sort of drought emergency. Okie is nearly as bad. Weather man will stick by earlier forecast and says more rain/ cool for the corn belt (more planting/ field delays) and not much relief for southern plains…BUT they may get frost this weekend!
             Overnite Paris wheat was lower and SK booked 1 cargo of US corn, passing on the 2nd account of px. India sold wheat to Bang, and Aussie sold feed wheat to Philippines (who would normally be taking Indian corn, but passed account of px). Brazil’s SAFRA says rains didn’t harm yields as much as thought, and that rains helped outlying areas much more than losses in flooded areas (rain makes grain). China says food inflation is currently at 11.7%, housing at 6.6%. Indian gov’t rates their inflation at 9%. They also said they expect a record wheat harvest of 84 myn mt. Question is how much will rot under tarps? They want to have 44 myn mt of rice/ wheat in reserves which is twice normal levels…remember all this is happening in a country where 37% of population is below poverty levels, and there never seems to be enough to eat. Egyptian gov’t has allocated $1.7 byn to slow food inflation.
***Didja Know: The ‘average’ grocery store has as many as 30,000 different items (2x as much as store might carry 20 years ago). If you took all the junk mail that floats through the US system everyday, it would/ could produce enough energy to heat 250,000 homes.

 Heavy selloff Tuesday washed an estimated 40m cak from the grain pits. Weather man sez more rain/ cold for the majority of the corn belt. Japan tendered for a bunch of feed grains (1.8 myn bu of wheat and 9.1 myn bly, but also booked 5.4 myn wheat last night (1/2 was DNS the rest split between SWW and HRW). After mostly a breather yesterday, the funds are back to the ‘sell’ mode again this morning. Export sales were at the high end of expectation for corn at 33.4 myn bu and mid range for wheat at 16.3 myn bu.
               FYI, some Ethanol facts from EIA: US exported 59.7 myn gallons in Feb. That is up 4% vs. Jan and 3 times last year levels. 18 myn gal went to the EU, 16 myn gal to the UAE, 15 myn to Canada and 2.6 to Brazil. Weak $$ helps exports…but the EIA also says that ethanol inventories are at record high levels.
             China cancelled at least 3 cargo’s of beans from SAM and the rumor has them considering 10 more. Beijing sold 3 myn mt of beans (1 months crush) in last auction. Brazilian farmers are storing beans in expectations of higher prices. WA is still very dry. Weather man sez the precip for the next 3 months will be less than ave. Last year WA produced 19% of the Aussie crop, where in a normal year they would do about 40%. Here are some of the latest 2011 Aussie wheat prod est’s: Rabobank is guessing 25 myn mt (down 4.9% from this years 26.9). ABARE has the crop at 24.3 myn mt and ACF (Aussie Crop Forcasters) 27.1 myn mt…but remember these are based on a crop not yet planted.
             BRIC (Brazil, Russia, India, China) credits price volatility and higher prices on ‘excess’ money/ speculation. EU Parliament opened the door for individual countries to continue bans on GMO, saying they ought to be able to ban GMO to protect local plants, habitats, alt farming practices. Ukraine is estimating they will be able to double wheat exports to 20-23 myn mt. For now Russia is staying with a 80-88 myn mt crop and the rumor is they will/ may lift exports this fall (October)? They did say that c/o stocks were 8 myn mt higher than thought. 5 myn more was found in storage and farmers are being credited/ blamed for rat holing another 3 myn mt.

***Didja Know: According to latest NASS, Oregon Winter wheat, corn acres will be unch’d from last year, and spring wheat acres will be up 30m acres. Hay acres will be down 45m acres.