Technically Speaking
Darin Newsom DTN Senior Analyst

Sunday 05/04/14

Star Wars Day and July KC Wheat
It's "Star Wars" Day ("May the 'Fourth' be with you."), and what better way to celebrate than a look at Kansas City wheat.[Read Full Blog Post]
Posted at 9:37AM CDT 05/04/14 by Darin Newsom | Post a Comment
Comments (1)
Exuberance: sometimes rational, sometimes not, likes to find its way into the Minneapolis hard red spring wheat (HRSW) market. Its own tight stocks and/or tight stocks of the plains hard red winter wheat (HRWW) -HRSW can fill in as a substitute for HRWW - tends to move price of the Minneapolis wheat to a premium to the Kansas market of HRWW. The potentially tight 2014-15 HRWW ending stocks and a slow pace of planting of HRSW might see such a move the spring wheat. A WAG (wild ass guess) at the 2014-15 HRSW balance sheet implies something like a 30% reduction in production, from trend, would be needed to cause a "tight" position in HRSW. This level of production decline has only occurred once (2002) in the last 28 years. Some folks are already talking of more than a 20% decline in planted acres of HRSW because of the current planting pace and conditions of the northern states where this wheat is grown (ND, 5,900,000 planted acres, 52% of total; MT, 2,600,000, 23%; MN, 1,200,000 11%; SD, 1,100,000, 10%; WA 216,000, 2%; ID, 196,000, 2% and the balance in OR UT and CO). So the potential for a 30% production decline is more likely if the decline in planted area is realized (5 out of 28 years (18% of the time): 1988, 1997, 2002, 2006 and 2011). With "high prices", growers in the North will take on the risk of "late" planting. They have planted into June with the proper financial motivation (There is the 1 in 4 crop insurance rule that may come in play for some producers as well.) but the potential for a fall killing frost becomes a real factor. Another factor that could add exuberance to the HRSW market is the transportation issues with the high level of crude oil exports from the region dominating the rail capacity. (The oat market this winter indicated how transportation issues can be a price mover.) So the Minneapolis wheat market should find many things to keep the exuberance on and off, rational or irrational, through harvest and beyond of the 2014-15 HRSW crop. Freeport, IL
Posted by Freeport IL at 11:07AM CDT 05/05/14
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