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The Grain Report

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Market updates from Walsh Trading.

The Grain Report by Tim Hannagan 5/2/2014

May 02, 2014

This is Tim Hannagan it's Friday, May 2nd. Let's address wheat first. A crop tour of key producing states took place this week with no surprising results. Oklahoma wheat yields were estimated at 18.5 bushels per acre. That compares to 31 bushels per acre last year. Production is estimated at 66.5 million bushels down from 105 last year with 55% of Oklahoma was rated in severe drought conditions as of April 22. Number one winter wheat producing state Kansas, has estimated production at 260 million bushels, down 18% from last year and 72% of the state is in severe drought conditions. Yields were estimated at 35.1 bushels per acre compared to 43.8 last year. Plants are considered short with fewer kernels .This led to the spread, long Kansas City wheat short Chicago Board of Trade wheat which expanded again this week. I have mentioned on this report and my Thursday 3 PM webinar several times that buying Kansas City selling Chicago Board of Trade wheat was a viable spread as long as the drought continues. However the spread has about run its course as harvest should start to begin in the Southwest late May, that's when traders will begin to sell Kansas City and buy Chicago Board of Trade. Reasons are we are pricing Kansas City wheat higher now because of drought conditions amid lower production. But as harvest gets underway the low quality wheat suitable only for the feed ration will drive the U.S. to a number two or three port of origin in the world to buy wheat from. The number one exporting country will be whoever produces the highest quality. Traders will begin to buy Chicago Board of Trade wheat as the quality of that wheat is much higher with proteins up higher as well. That's where the demand is going to be. Support for July lies at 6.88 with resistance 7.24.  A close over 7.24 and 7.55 is next.

Corn is 90% weather versus its impact against planting. After a wet week, this week, we see drier and warmer temperatures through to next Wednesday. This looks to allow for a big jump in corn planting as farmers are anxious to finish corn and get that much more profitable beans which is always planted last. Corn was 8 cents lower today in anticipation of the planting window opening up the next five days. Look for corn to open up lower Sunday night into Monday with a possible move to 4.92 basis July futures, at which point I would be a buyer. Look for Tuesday to bring short covering as traders get ready for the next rain event and planting delays starting Thursday into the weekend. Additionally next Friday is the monthly USDA crop production report. Traders will be buying on thinking the report will raise exports and lower ending stocks for the fifth consecutive month. Support on July futures is 4.92 then 4.78 with resistance at 5.04.

Tim Hannagan is Senior Grain Analyst at Walsh Trading. You can reach him direct at 312.957.8108, toll free at 888.391.7894 or via email at
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