Data Reports Might Help Bulls Regain Strength
Cash wheat prices have seen their rally stall from their highs last week as recent rains across the U.S. Northern Plains and Canadian Prairies have pushed the bulls out of the fields and back into the pen they’ve been cooped up in most of the year. This last week of June though might be the end of the intense volatility that we’ve seen the last month or so in grain markets since weather premiums started to creep in. This week, a lot of the focus will be on government reports, starting with Monday’s crop progress report in the U.S., Statistics Canada’s updated acreage estimates on Wednesday, June 26th, and then finally, a hotly anticipated quarterly stocks and acreage report from the USDA on Friday, June 28th. Ahead of these reports though, except for maybe durum, old crop cash wheat prices in the Prairies have certainly created an opportunity to sell what’s left in the bin.
This Monday’s crop progress report will likely be the most telling of what’s going on with the U.S. wheat crop. The most significant area to keep on eye on for spring wheat and durum production is in Montana. Drought conditions catalyzed the USDA to downgrade Montana’s spring wheat crop by a significant 14 points in one week to 68% good-to-excellent. On the flipside, after last week’s rains in the Southern Plains, it’s unlikely that the U.S. winter wheat harvest has progressed all that much. Through last week’s U.S. crop progress report of June 16, just 8% of the crop in the bin. This is already well behind the 25% seen harvested by this time a year ago and the five-year average of 20%.
Usually, I would asterisk any concern for this slow start to Harvest 2019, when the combines roll, we tend to push it until they plug. The only asterisk in this crop progress report (and probably next week’s crop progress report as well) is that, with the aforementioned rain, any harvest crop progress will be limited and the percentage will continue to fall behind their long-term averages. Further, with all this rain falling on a crop ready to be harvested, quality concerns are starting to mount. This immediately suggests different wheat characteristics like protein, moisture, and certainly vomitoxin and bleaching will be looked at more closely this year in the U.S. (for now, that is).
Coming back to Western Canada, it’s maybe too late for some fields as the dryness lasted too long for anything to emerge and grow. However, this is where I caution you to not wear “front-window” glasses, which is to say, what you see out your front window doesn’t equal the entirety of what’s going on. The bias can be strongly emotional, given the mental and financial attachment to your fields, but trying to understand why grain markets move the way they do ultimately involves separating logic from emotion.
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