Wheat Market Outlook Sask Wheat

While weather continues to be difficult to read and plantings are delayed, Mercantile does not see any major reasons for markets to fall, although wheat could be overdone.

Nevertheless, 97.9 per cent of Kansas is experiencing some sort of abnormal dryness, according to Mercantile, and there are concerns in most of Europe. In this climate, Mercantile does not see growers selling. 

So far, Funds are not covering their shorts, but Mercantile thinks they must be getting worried. While the weather remains uncertain, Mercantile suggests that growers make no new crop sales.

Mercantile says geopolitical tensions are causing additional uncertainty in the commodity markets. There is currently a standoff between the fund short and farmer holding. - Mercantile would use this rally to finish old crop wheat sales but would not sell any new crop for now.

Mercantile says the international climate remains fractious, particularly in the Middle East. Mercantile is slowly seeing energy prices increasing and inflation starting to rise. In their view, world buyers are largely finished with old crop purchases. Futures will be moved by whatever Funds or farmers need to do. Mercantile sees the old crop going lower as carrying charges increase, while there will be little trade in new crop while traders remain concerned about weather and growers don’t like the values. – Mercantile would target remaining old crop spring wheat at $0.10 above current values, but would not sell new crop wheat for now.

Mercantile will have a new WASDE report on Thursday. Mercantile expects the USDA to lower wheat exports because of the Chinese cancellations a few weeks ago. According to Mercantile, the USDA will leave wheat production estimates alone and still expects slightly stronger wheat futures while the politics in the Black Sea area remains unclear. There were rumours of more Chinese cancelation of some wheat and corn, Mercantile said. The Funds’ combined corn, beans and wheat positions are at a record net short for this time of year, which should keep the volume of trade low until the WASDE report is absorbed. Weather and politics will keep trade at a minimum. – Watch for opportunities to sell remaining old crop wheat. Mercantile would not touch new crop sales yet.

Mercantile believes Russian and Black Sea politics will likely dominate conversation in the coming week. If the dispute between RIF and Moscow continues, Mercantile says it could be bullish the current crop wheat. The USDA seeded area and quarterly stocks reports are out on Thursday. The trade is expecting larger wheat stocks (one billion bushels) and smaller seeded area (47.3 million acres). All this is combined with a short trading week given the Good Friday holiday. Mercantile does not recommend cash sales at this time.