It's not every day that spring wheat futures do the heavy lifting to support not only the other wheat classes but also the row crop trade, but this was one feature in Tuesday's trade which saw the nearby July spring wheat future bolt 27 1/2 cents higher, while the September gained 28 1/4 cents and the December gained 23 1/2 cents. All three reached fresh contract highs.
Drought conditions in the northern states are on the radar and led to sharply lower crop condition ratings as of Sunday, June 11. The good to excellent rating for the entire United States spring wheat crop was reported at 45%, down 10% from the previous week. At the same time, the poor to very poor rating increased from 11% to 21%. Media headlines point to this rating as being the poorest seen since 1988, almost 30 years.
The attached chart shows the trend in the crop condition index for South Dakota (grey line), Montana (blue line) and North Dakota (brown line) over the past three weeks, based on weekly USDA condition ratings. DTN's methodology involves multiplying the excellent rating by 3, the good rating by 2, the fair rating by 1, the poor rating by -1 and the very poor rating by -2, with the crop condition index being the sum of these numbers.
Over the past five years, these three states have produced an average of 74.8% of the total U.S. spring wheat crop. For contrast, the five-year average crop condition index for the entire six-state spring wheat rating is shown by the red line with markers.
Eyes will remain focused on the amount of moisture received across the northern states of the U.S., while weekly crop condition ratings may give some insight as to how the crop is responding to moisture received. Futures spreads continue to reflect a bullish view of fundamentals held by commercial traders, with the Dec/March spread moving back into inverted territory this session. The continuous active spring wheat chart shows nearby retracement resistance at $6.31 1/4/bu, while a weekly high of $6.38 3/4/bu from June 2015 may also act as resistance. A breach of these levels could result in a further move higher to $6.91 1/4/bu, which represents the 33% retracement of the move from the June 2011 high to the August 2016 low.
DTN 360 Poll
This week's poll asks if you think that Canada should take steps to harmonize wheat grades with the U.S. in order to accommodate a two-way flow of wheat. You can weigh in with your thoughts on this week's poll, which is found at the lower right of DTN's Canada Edition Home Page. We thank you and welcome your input!
Cliff Jamieson can be reached at firstname.lastname@example.org
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