The Bottomline for Wheat: There's Plenty of It, Analyst Says

The most positive part of the week for wheat was the higher start Monday morning. It was mostly downhill from there, culminating in a weekly reversal down after a seven-week rally. Kansas City was down 11¢ on the week; Minneapolis down 8 and Chicago down 14.

Crop progress reports show the spring wheat harvest 96% complete nationwide, and winter wheat plantings at 77%. The remaining harvest will be just feed wheat, if it gets harvested at all. As for winter wheat plantings, the northern states are running well behind normal, so it's likely there won't be much more planted at this late date. Early estimates are suggesting total winter wheat planting will be down again this year to a new all-time low.

Despite continued weather delays to wrapping up spring wheat and durum harvest, wheat markets seem to be running out of upward momentum. World prices did manage a bit higher trade this week, with Russian FOB offers up another $1/MT to stand around $207/MT.

Another supportive factor for wheat came on private estimates for Australian wheat production to decline another 3 MMT to 15.5 MMT, compared with USDA's current 18.0 MMT estimate. The International Grains Council this week lowered Australian production 2 MMT to 17.0, and took world production down the same 2.0 MMT.

Other than that, bulls didn't find much to stoke prices higher. Export sales were a dismal 262 TMT, down significantly from last week and the four-week average. Marketing year-to-date sales are running 54% of projections compared with the 61% average. With low numbers like this, USDA will likely be reducing export projections again in upcoming supply/demand reports.

The Wheat Quality Council released the results of wheat testing on this year's crop. They acknowledged that they couldn't sample all the spring wheat or durum due to the harvest delays. The high rainfall year led to high yields, but quality suffered as only 86% graded No.1 Northern Spring, compared with 95% last year. The overall hard red spring crop was graded a No. 1 Northern Spring, down from last year's No. 1 Dark Northern Spring. Protein managed to stay high at a 14.5% average, and average test weights were 60.7 lb/bu.

Hard red winter wheat fared better as most of that crop avoided the wet harvest problems. Test weights averaged 60.6 lb/bu, but protein was lower than average at 11.4% on high yields.

The bottom line for wheat is that there is plenty of it. And plenty of milling grade stocks as well – both domestic and worldwide. We see that with the price action in Minneapolis where prices stalled a month ago. The winter wheats have followed world prices higher, led by increasing Russian FOB offers.

Seasonally, wheat tends to stall out in late October. Just the fact that we had price action that can be discerned as a rally is a win for this market, considering world end stocks will be record high again this marketing year.

With the Southern Hemisphere's harvest just around the corner, it's hard to envision wheat being able to continue this rally. While Australia's production estimates are declining, they will still have notable exportable supplies. Argentina is slated for a near-record crop of high-quality hard red winter wheat and will compete head to head with Russia and the U.S.