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Walsh Trading Commercial Hedging Service is dedicated to providing timely, relevant and quality information. Tim Hannagan, our Senior Grain Analyst provides a weekly Grain Report. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Additionally, Mike Bauer, our Senior Livestock Analyst and Ben DiCostanzo, our Senior Technical Analyst provide frequent insights into the Livestock market. Finally, Sean Lusk and John Weyer, Co-Directors of Walsh Commercial Hedging Services provide a variety of insights into the Grain markets.
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.
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