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Unraveling the Red Wednesday in Wheat Futures Market

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Market Movement Overview

Chicago wheat futures experienced a downtrend on Wednesday, settling between 1 Β½ to 3 ΒΌ cents lower. Meanwhile, KC futures took a deeper plunge, closing 7 to 9 ΒΎ cents in the red. The tension in the market led to the July HRW/SRW spread reaching a 21 ΒΌ cent premium, painting a striking contrast. Springing into action, Minneapolis wheat futures weakened by 8 cents at the closing bell, with September Minneapolis wheat wearing a 9 cent premium badge compared to May.

Export Sales Dynamics

Before the storm hit, pre-report estimates hinted at wheat export sales varying from 200k MT of cancellations to 550k MT of net new sales for old crop during the week ending on 3/7. Additionally, traders eagerly awaited the weekly report to unveiling up to 100k MT of new crop wheat sales, a glimmer of hope amidst the darkness.

Global Clarity and Competition

A report from FranceAgriMer initially casting shadows with Chinese wheat cancellations was later clarified to focus on the USDA daily reporting system for the U.S. SRW. This symbolic reinterpretation waved away any concerns about French wheat sales to China. Amidst the chaos, wheat FOB prices reflected a competitive battleground, showing French and German wheat leading the charge at ~$5.60/bu. Despite Russian offers standing ~11c over, U.S. FOB prices hoisted at 66c more for SRW and a staggering $7.41 for HRW, signaling an intense competitive rift.

Moisture Matters and Crop Projections

NASA’s GRACE root zone soil moisture unveiled a comforting picture – Northern Texas and SW Kansas boasted significant improvements compared to the previous year. Central Texas and Eastern OK marched towards normalcy, a silver lining amidst uncertainties. However, the PNW still harbored scattered areas of concern, even though the overall conditions were notably brighter than the previous year. On the flip side, the ECB’s moisture scale transitioned from surplus to deficiency this year, especially pinpointing concerns for W. IL and MO.

The Ukraine grain union, shedding light on future prospects, projected a bleak outlook with their 2024 wheat crop tapering down to the smallest in 12 years at 20 MMT. This projection marks a significant 14.5% drop from the previous year, hinting at the struggles regarding land area and labor.

Settling in the Numbers

The closing numbers paint a vivid yet gloomy picture – May 24 CBOT Wheat closed at $5.44 1/4, down 3 1/4 cents, while Jul 24 CBOT Wheat hugged the ground at $5.58 1/4, down 2 1/2 cents. May 24 KCBT Wheat staggered at $5.87 1/2, down 9 3/4 cents, breathing down the neck of Jul 24 KCBT Wheat, which slipped 8 cents lower. May 24 MGEX Wheat wrapped the show at $6.63 1/2, down 8 1/2 cents, adding to the overall somber tone of the market.

On the date of publication, Alan Brugler did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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