Morning Wheat: No Sign of Top; China and US Crop Fears Sdd to Bullish Tone
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When it rains, it pours. On top of the Black Sea issues, the hard red winter crop in the southern US Plains is suffering from drought conditions, and China officials are indicating China's winter wheat crop could be the worst in history, according to the agriculture minister. Rare, heavy rainfall last year delayed the planting of about one third of the normal wheat acreage. China is the world's biggest consumer of wheat. China sold 526,254 tons of wheat or 100% of its total offer in an auction of state reserves yesterday. March wheat managed to close sharply higher on Friday with a very wide range of $12.01 1/2 to $13.48. This left the market with a gain of $5.05 for the week or up 60% last week. May wheat traded at the 75 cent limit up price of $12.09 and that was the only priced traded on the day. The market was locked limit-up this morning to $12.94, also the only price traded so far today. European milling wheat futures climbed as much as 11% and closed 1.5% higher on the session, and up 28% for the week and the market is up 13.65% this morning.
Russia and Ukraine account for 29% of global wheat exports, and a lack of progress toward a resolution helped to drive the market higher. Fears of a prolonged war effort has helped drive panic buying with prices near all-time highs. Ukraine accounts for 20-29 million tonnes of exports per year which is 10 to 15% of world exports. For the USDA supply/demand report, traders see ending stocks near 628 million bushels, 569-658 million range, as compared with 648 million in February. World ending stocks are expected near 277.59 million tonnes, 274.5-280 million range, as compared with 278.2 million tonnes in February. Food protectionism is spreading as Hungary bans grain exports and Argentina, Turkey, Moldova and others take more control of exports. India is expected to see record exports of near 7 million tonnes. Egypt is considering importing wheat from the EU. Algeria is tendering for 50,000 tonnes of wheat but they normally buy more than the tendered about.
Acres of spring wheat in Canada could rise 2% to 3% in 2022 as surging prices might encourage producers to shift acres from oats, pulses and durum. The March 1st Commitments of Traders report showed Wheat Managed Money traders reduced their net short position by 11,017 contracts to a net short of just 7,036 contracts. A shocker that managed money traders are still net short with the market near all-time highs. Non-Commercial No CIT traders net bought 9,029 contracts and are now net short 31,298 contracts. For KC Wheat, Managed Money traders were net long 45,481 contracts after increasing their already long position by 4,701 contracts. Non-Commercial & Non-Reportable traders are net long 43,893 contracts after net buying 4,668 contracts. Consider selling 1 July Wheat $12.40 put near $1.89 and buying 4 July $9.60 puts near 52 cents each. The net premium paid on the strategy is +19 cents, and there are 109 days until expiration. If after 60 days July Wheat is trading back to the $8.60 level, the spread could be trading near +$2.10, for a net gain of $1.91. If July wheat falls all the way back to the September low of $5.78 1/2, the spread would be trading near +$5.94 for a gain of $5.75.
TODAY'S MARKET IDEAS
On top of all the Black Sea issues, there is little or no rain in the forecast for the next two weeks for Kansas, Oklahoma and Texas and China officials are indicating China's winter wheat crop could be the worst in history, according to the agriculture minister. There is still no sign of a short-term peak with plenty of gaps for May wheat and an extreme overbought condition. At all-time highs it is difficult to find resistance