Market perspective

This past week wheat markets experienced a bit of a rally from their recent lows. Winter wheat harvest moved past the halfway mark and now stands at about 70% complete nationwide. More times than not that signals a rally in the wheat market. This year is no exception; the question is how high. Fundamentally, support also came from good recent export sales, particularly from China. I do not think it was a coincidence that China came when they did. They also know when the seasonal lows of a market typically occur. They might be communists but they understand free market trading very well. So far they have purchased over 40 million bu of U.S. wheat, along with U.S. corn and soybeans, and there is a good chance they will be back in for more.

This new export demand showed up in last Thursday’s USDA Crop Report, which increased wheat exports 100 million bu from the June report. Production figures were increased slightly and as a result overall wheat carryovers were reduced by 80 million bu to 576 million bu. The problem is that corn carryovers for next year remain burdensome. In the report, ending stocks for corn were increased slightly from the June report to 1.959 billion bu. Corn, however, was able to rally last week due to weather forecasts calling for hot, dry weather to move into the western corn belt during the key pollination stage of development, which would be the last half of July. But a moderation of that forecast on Friday had the markets on the defensive – at least corn and soybeans. Weather will be the big driver in those markets for the next month. Wheat held up pretty well despite the selloff in the corn pit. I still believe it will be tough for wheat to move significantly higher independently of the corn market, but the increase in demand definitely helped wheat last Friday.

Our local white wheat markets also received some good export news. Korea announced it will be back in for its usual western white requirements after finding no GMO wheat in any of its recent shipments. Japan was also back in the market last week, but with a twist. They tendered for 900,000 bu of club wheat exclusively from Washington state along with some U.S. Soft Red and some Australian Standard White. It will be interesting to see if this continues or they go back to their usual 20% club western white blend.

Locally winter canola harvest began last week. Wheat harvest looks to start in earnest sometime next week in the Odessa area. Generally crops still look to be average or maybe a little better depending on how hard the frost hit. There will be some disappointment though, especially the farther south you go. Other than that, I wish everyone a safe and speedy harvest.

Pearson Burke is the grain marketing manager for the Odessa Union Warehouse.