CBOT weekly outlook: Spring wheat premium widening over winter wheat

Row crop futures stuck in sideways range

MarketsFarm — All eyes remain on weather conditions in U.S. grain and oilseed markets, with soybeans and corn stuck in sideways patterns while seasonal harvest pressure causes the spring wheat premium to widen over the winter wheats.

The advancing winter wheat harvest has weighed on Chicago and Kansas City winter wheat contracts recently, with reports that Russia and Ukraine will continue with ‘business as usual’ exports adding to the softer tone, according to Bryan Strommen of Progressive Ag at Fargo, N.D.

However, Minneapolis spring wheat has held up reasonably well despite the weakness in winter wheat markets, with dryness concerns in the major growing regions in the northern U.S. and into Canada.

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K.C. hard red has lost roughly 20 cents per bushel over the past two weeks, to close Wednesday at $4.41 per bushel in the September contract (all figures US$).

Meanwhile, MGEX spring wheat has held within a relatively narrow range over the same time period, closing Wednesday at $5.3075.

The spread between the two contracts has narrowed from a low of about 20 cents in mid-April to the current 90-cent area.

Looking at the row crops, soybeans and corn are also stuck in sideways trading ranges from a chart standpoint.

Strommen noted the amount of land that went unseeded and into the Prevented Plant program remains unknown for now. The U.S. Department of Agriculture releases updated acreage estimates June 30, and he expected to see some intended corn area planted to soybeans instead.

Funds are holding a near-record short in corn for this time of year, which shows they remain bearish for the time being.

However, weather will play a major part in market moves over the next few months, especially with some warm and dry conditions in the extended forecasts.

“If rain comes into play, we don’t have much reason to go higher,” Strommen said.

However, if drought concerns intensify during the growing season, he didn’t think it would take much to trigger a short-covering rally in corn. “It will take a news event, weather event, or drastically lower acres.”

— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.

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