The wheat market was able to buck the action in corn and beans and went on to extend gains yesterday. We have been able to extend the gains again overnight, posting the 5th higher high in a row and tested the Ukraine air disaster inspired high of 5.84 ½ in the December contract. Realistically I find little news to support the rally so one has to believe it is predominantly technical but that said, those indicators would suggest there is a bit more to come yet.
More quality issues have surfaced overseas with Ukraine now reporting problems with excessive moisture. Keep in perspective that this really just creates an issue for millers and even then, there is ample good milling quality wheat around the world but the logistics need to be worked out. Harvest in Russia is now estimated to have reached 44% complete and the ideas of the crop size continue to grow with some now estimating numbers in the 60 to 62 MMT range. Keep in perspective that the July USDA estimate had them pegged at 53 MMT.
Informa updated their production estimates yesterday with very limited changes in wheat. They are looking for a total wheat crop of 1.986 billion which compares with the last USDA estimate of 1.992.
I see nothing yet that would suggest that this initial technical bounce in wheat is complete and if we can poke through 5.84 ½, it should open the door for a run to at least 5.95 and at the outside 6.25. Unless the government provides some type of bullish surprise next week though, it will be difficult to sustain the gains.
In typical Tuesday undo fashion the corn market finished lower yesterday but we have picked up the lost territory and then some in the overnight hours. I see little in the new that would back up the strength so one has to imagine this is little more than technical short covering in front of the report.
Nice showers cut across the middle section of the Corn Belt yesterday, coming as a bit of a surprise for many and the latest 6 to 10 and 8 to 14 day forecasts offer little for the bull. If correct it would appear that 80 to 85% of the production area will be receiving moisture and temperature throughout the period are expected to remain generally cooler than normal. Unless temperatures really warm up in the early fall, this could again be a banner year for the gas companies.
Informa released their corn estimate yesterday and did not boost yields quite as much as other private estimate. They pegged yields at 168 b/p/a for a total production of 13.988 billion bushels. While this was less than the others, it still reflects an increase of almost 3 bushels from the July USDA estimate.
As I mentioned initially, the strength Monday and again overnight would appear to be technical short covering in front of the report and with the higher highs overnight, we should have the door open for a test of the recent highs at 3.78. That level should provide the real test as to if this market has any momentum and if we can poke and close through that point, we could be lucky enough to catch a quick run to the 3.95/4.00 zone. If that occurred in front of the report, Uncle Sam would need to provide us something pretty positive to sustain the strength. What do you think the odds are of that happening?
It has been unusual for beans to take a back seat to the corn and wheat markets but that is what we appear to have at this point. As with corn we did see a Tuesday undo setback and have strength overnight but so far the range is tight and we are looking at a second day in a row of inside trade.
The report and weather are the only two key elements this week. While you could say both are unknowns at this point, we will know the answer to the first in just a few days and if the latest weather runs are correct, the bull is not being provided with much to sink his teeth into. Above normal moisture is forecast in both the 6 to 10 and 8 to 11 day forecasts, which would seem to take away the crop deterioration story, if there really was one. Informa left their bean estimates alone, which were lower than the current USDA and trade idea numbers to begin with. They have the yield at 44.5 b/p/a for a total production number or 3.7 billion bushels.
Even though we have not been able to make good on the reversal posted Monday, I would like to think that beans can still post a technical rally between now and the report with room to reach back to the upper end of the trading zone around 11.15. To push further than that, we will need a surprise from one of the two factors outlined above and right now the odds do not seem to favor that happening.