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Wheat Outlook - Wheat faces seasonal test

Demand improves but may not be enough

The end of summer is a season fraught with risk for the wheat market. Price charts in all three futures market flashed those warning signs loud and clear last week as wheat remained mostly an afterthought following USDA’s Aug. 12 reports.

The agency’s forecasts weren’t all that bad for wheat. Though USDA’s estimate of 2019 production was up substantially, demand is improving too, albeit not as quickly as supply. Still, projected ending stocks on May 31, 2020 could remain over 1 billion bushels, which is plenty in a fragmented world market where there’s plenty around for buyers to choose from.

The trouble for wheat headed into fall also comes from a cash market. Farmers with fall crops to harvest and store typically dump wheat to make room, weakening basis and with it futures until the “gut slot” ends. Prices for both cash and futures can strengthen after that, but typically the advance is modest if the market is in a downtrend.

Hard wheat markets made new contract lows last week, keeping those contracts clearly bearish. Soft red winter wheat held on but also remains in a downtrend. All three markets formed potential bear flags, with a break to new lows threatening another leg down.

Help if it comes may could depend on this year’s unusual growing season. Delays harvesting corn and soybeans could keep inventory without a long-term home off the market longer than normal. And storage space should be more plentiful too with corn and soybean production lower. Carry in winter wheat markets continues to tighten, reflecting stronger basis.

Wheat’s longer-term outlook doesn’t look much brighter. Most areas in the northern hemisphere haven’t had a perfect growing season but crops look good enough. Australia remains very dry despite the end of El Nino, which is expected to help rains return. But production will still be lower, opening the door for U.S. sales of white wheat in Asia.

The crop in Argentina got off to a good start, but it’s been a dry winter there too in parts of the growing region. Political turmoil and rampant inflation could also bring a return of export controls by the time harvest takes place.

Harvest of winter wheat on the central and northern Plains is also dragging on longer than normal. But many areas have very good moisture for seeding. That usually convinces farmers to seed a crop even when prices are low, especially if it can be grazed.

Higher corn and soybean prices could change that narrative, with a rising tide also lifting old crop futures. That remains something of a long shot for now however.


Better demand will help offset larger production but ending stocks above 1 billion bushels remain a drag on the market.


Australia’s wheat belt needs rain after a dry winter there with a weather pattern shift possible due to the end of El Nino.


Wheat export sales are improving but still are big enough to offset larger supplies.


The move to new lows in HRW have that market clearly following the bearish seasonal path, which suggests only limited rebounds into the fall once lows are put it.


Download a complete version of the outlook with extensive charts and analysis using the Download button at the end of this report.

More from Farm Futures:

Corn Outlook

Soybean Outlook

Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Market Review on he writes weekly reviews for corn, soybeans, and wheat futures that include selling price targets, charts and seasonal trends. His other weekly reviews on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.

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