Market Perspective

This Monday, the USDA released its Stocks and Acreage Report. The biggest numbers in the report were the corn stocks, as of September 1, which totaled 824 million bu. That was higher than any of the pre-report estimates. The other number in the report was wheat stocks, which came in at 1.855 million bu, which was on the low end of the estimates and the lowest September 1 wheat-stocks number since 2007. Based on these numbers it looks like USDA has acknowledged that there was more wheat feeding during the summer than had been previously reported. Also, the impact of strong export demand for wheat is becoming more apparent.

Even before this report came out, the wheat market had started to separate itself from the corn and soybean markets. Technically wheat had broken its downtrend on the charts, and there was some light shortcovering by the speculative funds. Corn and soybean harvests continue to pick up steam. Monday’s Weekly Crop Progress Report showed the corn harvest 12% complete nationwide and the soybean harvest 11%. Both of those markets have felt the harvest pressure. Wheat, on the other hand, continues to see strong export demand with over 20 million bu in export sales the previous week. Wheat only needs to average 13 million bu per week for the rest of the year in order to reach USDA’s projections. As a result, wheat was able to rally, while corn and soybeans faltered heading into the Stocks Report.

The report added more evidence to the idea that the fundamentals for wheat are much more positive than the fundamentals for corn, especially as the gut slot of the corn harvest approaches. When the report came out, corn and soybeans moved sharply lower and wheat moved strongly higher. Wheat did pull back later in the session pressured by the sell-off in corn and soybeans. Both Chicago and Minneapolis closed slightly lower. Kansas City, which represents Hard Red Winter, closed strongly higher. In the stocks report, HRW was the one class of wheat in which production numbers came in below trader estimates.

Soft White has moved higher with the rally in the futures. Export business remains decent but not as strong as Hard Red Winter or Soft Red. Selling from the country continues at a steady pace as farmers catch up after a slow start during harvest. While the long-term outlook is positive, the market will see some dips. Technically the wheat market is now over-bought. We could still feel some pressure from corn harvest, especially in the futures. The Australian wheat crop appears to be in decent shape, and we should begin to see competition from them for November and December business. Throw in the wild card of the U.S. government shutdown and upcoming debt ceiling debate, and there are some potential pitfalls. But for now, at least, the market is starting to view the fundamentals of the wheat market more positively.

Pearson Burke watches the grain markets for the Odessa Union Warehouse.