Wheat Finds a Late Week Rally

It was another week of quietly drifting lower until late Thursday when we got a bounce off early weakness and scored what looked like a minor spike bottom. The follow-through buying on Friday suggests we should have more rally power into next week.

Export sales last week came in at 494 TMT, with spring wheat the highest seller at 177 TMT. Year-to-date sales stand at 14.5 MMT, 56% of the total projections and slightly behind the average pace of 63%.

Winter wheat plantings stood at 85% complete as of last week, up 8 points from the previous week and 3 points above the average. However, Montana's plantings were 8 points behind the average at 87%. We also got the first conditions report of the fall, with 56% of the nation's winter wheat in good/excellent condition, 3 points ahead of last year.

Northern Plains' winter wheat appears to be in better shape than the rest of the country, with Montana showing 75% good/excellent and just 5% poor/very poor.

Egypt bought 235 TMT this week, 115 TMT from Ukraine, 60 TMT from Romania, and 60 from France. Average price was $235/MT CIF, up $5/MT from two weeks ago. There were no U.S. offers, but hard red winter out of the Gulf would have been cheaper than the sale price – if Egypt had wanted hard red winter.

It is also worth noting that Russia didn't sell any wheat to Egypt, very unusual considering their normally aggressive offers. One could expect that they will step up next time to maintain market share.

World prices have steadily moved higher over the last two months, rallying about $25/MT since early September, the equivalent of about 68¢ a bushel. Futures prices have largely followed that price rally, also following the normal seasonal price pattern.

The Southern Hemisphere's harvest will be in full swing in just a couple of weeks and we can expect to see a surge in cash wheat moving into the pipeline. Argentina has been whittling down production estimates, but they're still looking at a large crop of good-quality wheat. Current official estimates stand at 18.8 MMT, down 2 MMT from last month. That, however, was offset by an increase in European production of 2 MMT this week. Those two regions produce different types and qualities, but nevertheless, from a world production perspective, they just offset each other.

Australia will cut another small crop but will still have plenty to sell, mostly looking at the southeast Asian markets.

Typically, wheat tends to peak in the late October window, and there is a good chance it did just that a couple weeks ago. Then prices moved steadily lower until late this week when we got a nice bounce following a reversal on Thursday. I think there is a good chance we'll test the recent highs, but I also think it will be difficult to take them out.