- Spring weather conditions will increasingly drive markets
- Bears cite large grain stocks, bulls wary of inevitable weather scares
- Wheat markets may be basing following winter sell-off
In the weeks ahead, we will start to get a better handle on overall North American plantings conditions, European Union dryness issues, Indian heat, Chinese dryness in the north and too much rain in the south, as well as Black Sea wheat progress running weeks ahead of normal - and whether any of these weather stories have legs.
Debate will continue on whether the managed speculative funds are vulnerable ahead of the growing season given their expanded net short positions in grain market futures.
Bears cite large U.S. carryover stocks, record South America production, improving American hard red winter wheat prospects and no evidence yet of extended planting delays for either the U.S. or Canada.
The broader grain market is patiently waiting for the calendar to advance into the 2017 planting/growing season before tipping its hand.
Bulls cite the likelihood of inevitable crop scares, trader complacency at already low prices and likely a commercial scramble to extend forward coverage at the slightest provocation of crop adversity.
Short term outlook
For the short term, we are hard-pressed to identify any catalyst in the North American planting season that would trigger notable short-covering by the managed funds. So then, the broader grain market is patiently waiting for the calendar to advance into the 2017 planting/growing season before tipping its hand.
Wheat markets generally - and spring wheat futures in particular - have trended lower since peaking in February. On March 3, Minneapolis May spring wheat futures broke below its upward trendline support, and have stayed below that line since then.
U.S. wheat markets are struggling to hold any rally attempt. Bearish market sentiment regarding abundant U.S. and global wheat stocks continues to dominate price action - there is no change in sentiment there.
The current estimate of U.S. all-wheat carryout for 2016-2017 marketing season at over 1.1 billion bushels is the largest since 1988 and suggests a stocks-to-use ratio at a scary high 50 per cent. And while the latest estimate of U.S. spring wheat ending stocks at 197 million bushels is actually down from 2015-2016, it's still higher than the five- and 10-year average carryout, representing 32.5 per cent of annual use.
A key market factor going immediately forward is the evolving weather developments across the growing regions of the southern U.S. Plains, Midwest and Southeast. U.S. winter wheat crop conditions at this time are believed to be fairly good overall, but acreage is the smallest in over 100 years.
The U.S. is starting to look a touch too wet west of the Mississippi River following months of being too dry, while east of the Mississippi continues to get hit and miss rains every three to five days that have left little to no dry down time.
When will it stop?
Some forecasters have this trend stopping in the next week to 10 days and drying out, but a growing number of forecasters are indicating that this pattern will likely stay in place through at least to the end of April, if not the first week of May. Time will tell who is right, but the trade will become increasingly sensitive to spring season weather issues.
For now though, despite exhibiting oversold technical conditions, wheat markets are likely to hold around current levels - not a lot of life evident to independently drive this market.
Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit