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Contributor

New Look on Wheat

Hi,

   Because of all the talk of "no hope for wheat", I started looking into the macros of the wheat complex.   I googled "Wheat Harvest in Europe".   On Friday, July22, the French wheat crop was lowered to less than 30mmt-down from last years 41mmt.   The good to excellent rating was lowered to 42%, down from around 80% in June.   I'm pretty sure they have another 6-10 days of wet weather ahead of them.   Poland was lowered 10% feom last year(down a little more than 1mmt)   Germany is now getting inclement weather with talk of lowering their estimate along with the Brits crop being down over 1mmt from last yea.   Bottom line-EU wheat crop could very well be lowered 20mmt or more from the latest July WASDE-maybe not all in August though.

   In June, Agweb reported that China's wheat crop could be down 23mmt to 107mmt from 130mmt due t o floods, etc.   China official estimate stayed at 130mmt, which is what the WASDE used as their number.   What makes the Agweb report believable is WASDE raising China's feed wheat usage by 5.5mmt this year.   China is continuing to get heavy rain and flooding with the Weather Channel reporting 4million acres being wiped out this last week.

   There are concerns in Canada about continued wetness.

   From what I hear, the Black Sea region is doing pretty well, although Ukraine and S Russia got some kind of rains this week.

   Bottom line, 40 to 50mmts of world wheat production may simply vaporize from the WASDE in the coming months with no real large world production numbers replenishing supplies until northerm hemisphere harvest next year.   The world tradable wheat number could fall below 100mmt as China is holding around 100mmt, depending on how WASDE treats the new numbers.   Wasde will have to acknowledge some of the new numbers coming out of Europe, for starters.   Southern hemisphere production conditions could very well cause some wild trading in the wheat market, esp. with managed money holding a boatload of short positions down in the hole.   FWIW

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8 Replies
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Veteran Advisor

Re: New Look on Wheat

bless you

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Honored Advisor

Re: New Look on Wheat

No one who works at Ag.com will tell you the quality of the US wheat crop either.
You will have to get that somewhere else. Although there was decent yields, the May June rains dropped quality, test weights were low with much in the 54-55 range. Our area had a high percentage grade 3&4.
One large feedlot took 1.5 million bushels of feed grade wheat straight from the field.
And will probably drop wet corn purchases .
We only repeat the USDA projected reality.


Anybody going to discuss what this heat is doing to late planted corn
Outside Iowa, all those other states where most of the corn is raised.
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Advisor

Re: New Look on Wheat

I wouldn't be short it for anything.

 

But with the US and FSU crops likely still growing and the Black Sea shipping season just getting rolling, I'm also not going to hold my breath waiting for the trigger that runs the shorts out.

 

I don't know if anyone remembers but in Fall 2006 all the experts were highly conflicted on how and when the new ethanol demand was going to be reflected in corn prices.

 

What actually happened was that the AWB got backwards in a very short wheat market with a deteriorating crop and it took about a buck for them to buy their way out.

 

At that point, corn gapped into new highs and held it, right in the face of a good harvest, and a multi-year Buyer's Panic ensued.

 

I'm not sure how that applies, other than the wheat rally will come someday and it will probably help corn some when it does. And I guess to pat myself on the back a little since that evening I posted here that it was my opinion that one should Listen to the Market and not sell anything for as long as you could stand it.

 

I actually didn't knock the eyes out of the market in those years if you define that as selling most near the highs but also didn't sell a single grain at low prices. And that would include the 2008 collapse although holding hedges that summer took a couple years off my life.

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Honored Advisor

Re: New Look on Wheat

This one is a real potential mess this fall.  All feedlot use of wheat will transfer to less corn storage this fall in an area where we love to take pictures of piles of stuff, because we haven't built substantial storage in 50 years...    Those pits at the big feedlots are important.... 

With one coop on the rocks and the other full of wheat.  We are already hearing rumors of "It will have to be sold across the scales" and "It can't come here if it doesn't have a contract"    Here come long lines and combines sitting...  

 

By the way, the coop full of wheat, is looking at taking on a Cargill facility in the Texas Panhandle..... Rumor is Cargill wants out to concentrate internationally...   Every time I here that it reminds me of the manufacturing rushing to leave the country for better place to do business.  

 

We will get what we have sewn.

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Veteran Contributor

Re: New Look on Wheat

Agrimoney.com is reporting wheat shorts in trouble. Another thing, comercial elevators report the carry is the most profitable option in the grain buisness. have no intent to move grain.

 

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Senior Advisor

Re: New Look on Wheat

Very good effort. Fundamentals in the field of significant size determine market conditions down the road that 'markets' eventually have to react to, late though that might be! The 'market' is usuallly the late follower but those that pay attention can often get their ducks in a row by then with continuing physical trends.

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Veteran Advisor

Re: New Look on Wheat

Glad to see our friend from the NW
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Veteran Advisor

Re: New Look on Wheat

Palouser.......pls contact me as I have lost your contact info and have something to pass along

 

thnx...Ray J

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