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Maltby Marketing News for June 18

Maltby Marketing News for June 18

Kansas Association of Wheat Growers

June 18 Dan Maltby Marketing Newsletter

Hello Kansas Wheat.

Seems like a long time ago, but on Tuesday the USDA released their June WASDE update, which some “analysts” said was bullish wheat. Why not? World wheat production was cut by 3 million tonnes. Had to be bullish, right?

Unfortunately, because wheat prices are much higher than corn (or barley), world wheat consumption was reduced 3 million tonnes, and worse, the USDA revised beginning world wheat stocks 2 million tonnes higher…net, 2018 world wheat carryout was projected to be 2 million tonnes higher than the May report.
So it was not a bullish report at all.

Russian wheat production dropped by 3.5 million tonnes, and their exports were reduced by 1.5 million tonnes, which may indeed limit their ability to reach into Brazil, but other inputs were not friendly.

India’s production increased by 2 million tonnes, which will lessen the need for a big Aussie crop (which was not changed, yet.) Argentina’s crop estimate was not changed, yet, nor was Canada’s estimate, yet. All of those countries will see revisions as the year progresses. Europe dropped a million tonnes, opening the door for Ukrainian and further Russia reductions, but…this was not a bullish world wheat WASDE update.

The USA wheat picture by itself, however, was a little friendly, mainly because USA wheat exports were projected 25 million bushels more. Unfortunately, this did not lead to a straight-line reduction in USA carryout, because carry-in was increased by 10 million bushels, and production was raised by 6 million bushels, all due to winter wheat.

However, it’s been a greenhouse so far in North American spring wheat country, so I personally am viewing this cut to USA carryout very skeptically. Let me be very clear: the North American spring wheat crop is going to be relatively gigantic.

The USA average farm price for wheat was raised a dime, with the mid-point now $5.10/bushel, which is 35c/bushel higher than last year.

Probably underlying support came from the USA corn outlook, which we’ll look at closer in a minute, but reduced carry-in, increased industrial usage and increased exports might be setting the stage for some fireworks down the road. USA corn average farm price for 2018/19 midpoint also went up a dime, to $3.90, which will be 50c better than last (this year, actually, as corn’s marketing year doesn’t end until August 31).

Potential for a corn explosion, and a wheat dud is what I see happening the rest of the year.

UNLESS of course, Brazil keeps buying boat after boat of USA wheat. It’s as simple as that. AND as I see they did buy another boat this week, the possibility exists.

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Source: Kansas Association of Wheat Growers