Hard wheat futures led a rally in prices of the grain as data showing a relatively slow pace of US plantings of the grade added an extra concern to the worries which sent the broader complex higher.
Wheat futures in all major markets on Tuesday, with Chicago soft red winter wheat, the world benchmark, standing up 1.9% at $5.25 ½ a bushel in late deals for December delivery, on course for its first close above its 100-day moving average in more than two months.
In Paris, soft milling wheat for December settled up 1.7% at E179.25 a tonne, a seven-week closing high.
However, Kansas City-traded hard red winter wheat futures for December fared particularly well, adding 2.7% to $515 ½ a bushel, closing its unusual premium to its Chicago peer.
The buying reflected in part the continuing concerns dryness in parts of the former Soviet Union, where growers are trying to plant crops into soils which, in many areas, are far drier than would be ideal.
Weather service MDA said that while showers in the east of Russia’s Central Region and parts of the Volga Valley this week “should improve moisture a bit for winter wheat germination… notable dryness will continue” in areas such as southern Central Region and central and eastern Ukraine.
Richard Feltes at broker RJ O’Brien, terming “bleak” the autumn weather outlook for the former Soviet Union, said that nearly half of the region’s winter wheat belt was “labouring under cold and dry conditions”.
At CHS Hedging, Joe Lardy said that “dryness in the Black Sea region has wheat rallying today”.
Dryness in Australia, where many crops require rain ahead of harvest to fulfil yield potential, also attracted attention, as high temperatures added to concerns.
“It looks increasingly likely the top end yield potential is being taken off the table,” said Tregg Cronin at North Dakota-based Halo Commodity Company, while
“Boots-on-the-ground [are] suggesting searing heat has been witnessed the past four or five days.”
A range of estimates of 23m-25m tonnes “is now being used as a place-holder for Australian wheat production versus ideas for 26m-27m tonnes a month ago”.
Earlier, Tobin Gorey at Commonwealth Bank of Australia said a period of higher-than-normal temperatures in some eastern areas of the country had been “disastrous for crops.
“And even those with a reasonable moisture profile will have seen yields dwindle over the past few days.”
Hard vs soft
However, fears for the US hard red winter wheat crop rose a notch too after US Department of Agriculture data overnight showed a divide in fortunes of farmers in the type’s southern Plains heartland, where dryness is spreading, and those in the Midwest, where soft red winter wheat is grown.
While the overall pace of US winter wheat sowings, at 49% complete as of Sunday, was only 2 points behind average, delays were centred on hard red winter wheat-growing states such as Kansas, Oklahoma and, in particular, Texas where sowings were 37% complete, 10 points behind the typical pace.
Sowings in the Edwards Plateau, South Central, and South Texas experienced “delays as producers waited for soil moisture conditions to improve”, USDA scouts said.
In Oklahoma, where plantings were 4 points behind the typical pace “nearly 17% of the state was rated between moderate and exceptional drought, up approximately 6 points from last week”, if well below year ago levels.
By contrast, within soft red winter wheat areas, Michigan plantings were 10 points ahead of the average pace, and Ohio sowings ahead by 14 points, helped by weather which was dry enough to see a rapid pace of soybean harvesting – freeing up land for winter wheat seedings – but with “many growers seeing windows of precipitation to help germination” too.
‘Really hard to understand’
The extent of the dryness in hard red winter wheat-growing regions was “not a large shock at this point of the year”, when the growing season has a long way to go, an analyst at a major US broker told Agrimoney.com.
“But in parts such as south west Kansas, and parts of Colorado, it does look like farmers are dealing with pretty dry soils,” supporting an opportunity for traders to close the unusually large discount of hard red winter wheat futures to soft red winter wheat ones.
Indeed, many investors are finding this discount, which set a closing high of $0.13 ½ a bushel on Monday, “really hard to understand”, given the higher quality of hard red winter wheat, the analyst said.
“OK, people on the global market are not breaking down the door to buy our hard wheat, but they are not exactly clamouring for our soft wheat either.”
The analyst forecast Kansas City wheat futures outperforming Chicago ones over the next few months, to bring the gap between the two types back to “somewhere near a mean level”, seen as a premium to hard wheat of about $0.15-0.20 a bushel.
(Source – http://www.agrimoney.com/news/hard-wheat-leads-wheat-price-rally-as-us-adds-to-weather-woes–8855.html)