Overnight news headlines of Europe's smaller wheat crop expected for this coming year tried to give the wheat complex a little boost as we ended the night. In fact, it looked as if someone bought several hundred contracts of Chicago wheat in the final few minutes leading up to the morning pause, and it helped all three classes of wheat finish right up near their evening's highs. But, this morning, we warned people not to be fooled by this late surge, and that the wheat complex was probably going to need additional positive influences if trade wanted to extend the rally once we moved into the day session. Not because the news was fake, Europe's wheat production will be smaller year over year, but this is not new news, and Russia's wheat crop is expected to be much larger year over year that will offset that reduction. Matif futures firmed off the news and stayed around one Euro higher throughout its session. US wheat futures maintained their overnight gains through the first few hours of the day session, but it seemed once the European markets closed (11:30), trade here in the US started to weaken. The balance of the day saw two-sided type price action, with all three classes of wheat eventually finishing slightly lower on the day. Chicago futures finished between 1 ½ and 3 ½ cents lower, and for the week, SRW wheat finished 16 cents lower. KC wheat futures settled only a couple ticks lower, and for the week, HRW wheat finished seven cents lower. Mpls wheat futures ended the day around a penny lower, and for the week, Spring wheat finished ten cents lower. The bull spreads in Chicago firmed again, with the March/May rallying almost two cents which helped turn the spread back to an inverse.
The biggest take that should be taken out of the long-term projections the USDA released today is in the verbiage. They said expect domestic use and exports to both experience slow growth and ending stocks to be drawn down. With exports generally flat, the US share of global wheat trade should continue to decline, particularly due to growing competition from the Black Sea region. US export growth is tempered by sustained price competition from Russia, Ukraine, and the European Union. Can't see too many people disagreeing with that statement. They also mentioned wheat-to-corn price ratios should remain stable throughout the projection period. However, on ample supplies of other feed grains, wheat feed and residual levels are forecast to decline in the first years of the projection period before stabilizing. Another comment I can get on board with. What puzzled me a little was this comment: Modest production shifts across wheat classes in the US are expected to reduce demand for importing spring and durum wheat from Canada. Hard for me to get on board with that comment as China will mostly look at buying Spring wheat first (if they are to come into the US market and buy US wheat). If that were to happen, the US will look to Canada for Spring and durum wheat. The tables they put together was quite baffling as they pegged exports this year at 950 mil bu (the USDA just raised exports to 1.0 bil on Tuesday), and they pegged ending stocks for this year at 1.043 bil bu, which is more than 100 mil bu above what the USDA projected in Tuesday's report (940 mil bu). Hard for me to take this data with a grain of salt with it being so out of touch with Tuesday's projections.
As we look ahead to Monday night, the CFTC report this afternoon did not show as much of a reduction in fund length that was expected. They are still long wheat, and technically, the charts continue to be negative. The phase one trade agreement does begin Saturday, and with the US markets closed on Monday for President's Day, trade will have to wait until Tuesday for any signs of fresh Chinese purchases (probably meats first), but don't hold your breath. Unless something develops over the weekend, look for selling on any rallies between 5.50 and 5.55 basis Chicago March. Because of the fund position, a settle below this week's lows in Chicago March at 5.38 ¼, and a settle below 4.57 in KC March would probably be enough to ignite a stronger move to the downside.
HRW basis saw little change from Wednesday. Bids for 11 pro remain +90/+100, the 11.5 pro remains +98/+108, the 12 to 12 ½ pro remains +130/+140, and the 13 to 13.5 pro is +185/+195. Export bids saw minor changes. For Feb, ORD firmed two to +122, and the 11 pro was down one to +134, but 12 pro remained +155. For March, ORD remained +127, the 11 pro stayed at +137, and the 12 pro remains +160. For April/May, ORD was unchanged at +129, the 11 pro is still +138 and the 12 pro remains +160. SRW wheat bids at the Gulf saw little change. Feb is 105/112 and March remains 105/115, but April firmed to 110/118 (up 5 / up 8). HRW wheat bids were unchanged. Feb remains 172/177, March 173/178 and April 170/175.
The commitment of trader's report Friday afternoon was expected to show the large spec (funds) to be sellers of around 11,000 contracts of Chicago wheat over the period ending Feb 11. What the data showed was that they were sellers of around 7,900 contracts. At that time, it reduced their net long position to 13,800 contracts. In KC, funds were buyers of around 1,650 contracts, which at the time lowered their net short position to around 9,200 contracts. Managed money was sellers of roughly 6,200 contracts in Chicago, which lowered their net long position to around 45,900 contracts. In KC, managed money bought roughly 2,200 contracts, which at the time, increase their long position to around 10,500 contracts. Managed money was a seller of 2,200 contracts of Spring wheat, which increased their short position to 6,854 contracts.
France AgriMer data said that as of Feb 10, soft wheat conditions were 65 pct G&E. Although this is unchanged week over week, conditions are down from where they were at in December (73 pct G&E), and much below levels where they were at this time last year (85 pct G&E). Keep in mind earlier this week, France's farm ministry lowered their projected planting area by more than 5 pct year over year to 4.7 mil hectares.
Export business this week:
*** On Thursday, Japan bought 110,565 mt of Aussie, Canadian and US wheat. The total included 27 TMT of Aussie, 49,375 mt of Canadian, 18,945 mt of US HRW and 15,245 mt of US DNS.
*** On Tuesday, the GASC bought 360 TMT of wheat, of which three cargoes were Russian and three Romanian. The avg price was $239.47/mt C&F. The grain was for March 21-31 shipment.
*** Also Tuesday, Algeria bought upwards of 680 TMT of wheat (probably mostly French). This is an even larger than normal purchase for them, but they were in for two shipping periods. The price allegedly paid was between $237.50 and $237.75/mt CIF. In their prior tender (Jan 22), they bought around 400 TMT at $245/mt CIF.
*** Jordan ended up buying 60 TMT of milling wheat in their tender that closed Tuesday, paying $224/mt C&F. There were three firms that participated in the tender.
*** Feb 17 Syria is back in for 200 TMT of Russian wheat. This is the third time Syria has been in for Russian wheat, with the previous two times resulting in no purchase.
*** Feb 18 Turkey's state grain board TMO has issued a series of international tenders to purchase a total of around 250 TMT of wheat and 50 TMT of durum.
*** Feb 18 Jordan back in for 120 TMT of opt origin hard wheat.
*** Iran looking for wheat for March.
*** Philippines looking for wheat for April.
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