Canada Markets

One week's data does not make a trend, but wheat market watchers received a pleasant surprise this morning: the USDA announced United States wheat export sales at 1.01 million mt for the week ending Dec. 20. This was the largest one-week sales volume reported since February 2011 and far exceeded expectations from the trade. Is this the turning point that the market has been waiting for? Perhaps the markets didn't think so.

Kansas City hard red winter wheat futures closed up 2 3/4 cents today, posting losses of 16 cents for the week. Chicago soft red winter wheat futures gained 6 1/2 cents in today's trade, paring weekly lows to 13 1/4 cents, while Minneapolis spring wheat futures gained 3 cents/bu., limiting losses to 13 3/4 cents for the week. Forward spreads also do not paint a bullish picture for wheat, with the more active Chicago wheat futures indicating futures spreads as flat. The forward curve for wheat futures indicates wheat trading at a carry as we move forward, also indicating a lack of immediate concern for wheat supplies.

Within the data were reported sales to Egypt, with rumors that more may be announced early in the New Year. Wheat market commentary from Europe is making constant note of the competitiveness of U.S. wheat offers, as Europe fights to compete.

Then there's the cash market. Of course, this is a time of year when grain movement will slow due to holidays, while frigid weather and storms across the U.S. Midwest are undoubtedly slowing movement. One U.S. tweet today suggested cash basis levels were on fire and you "can't buy cash wheat with a gun!"

The New Year will answer a great number of questions for us. The ongoing drought in the winter wheat growing areas, rated as severe to extreme for many States, has yet to play a role in determining prices. Historically markets react to poor crop ratings upon the breaking of the winter crop's dormancy in the spring, when the extent of the damage is more fully understood. At the same time, one would expect the delivery of grain to be affected far earlier as producers elect to sit back and see what happens. Perhaps cash basis will signal the severity of the situation sooner than the futures markets?

Until then, one can only watch for the signs of a changing tide and hopefully today's bullish export report is one of them.

Cliff Jamieson can be reached at cliff.jamieson@telventdtn.com

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