Market Matters Blog

So it might be cliche, but a picture really is worth a thousand words. I've attended the Wheat Quality Council's Hard Red Winter Wheat Tour every year since I started at DTN until now, and I have to admit that watching it unfold on the social media site Twitter has been very cool.

Back in 2011, people on the tour thought I was crazy for tweeting, but that was when I had a Blackberry with a joke for a camera. Smartphones today are so much more powerful, and they've made the wheat tour come alive.

Over the past few days, pictures morphed from a stream of mildly damaged and delayed wheat to an avalanche of dust and despair.

"That's the real info coming from the tour: the countless pictures on social media," DTN senior analyst Darin Newsom said. "Yield guesses are meaningless, but we can see for ourselves the damage that has been done to the crop. Yellow leaves, a yellow stem near the growing point, thin stands with blowing dirt in between rows, cracks in the ground. That's the story."

Yesterday's 34.7 bushel per acre yield was the lowest first-day tour estimate in at least a decade. Field-by-field yield estimates are trending even lower on Wednesday, with most of the commentary on social media indicating that those yields are only possible if there's a lucky break in the weather.

The advantage spectators of this online phenomenon have is they can watch the markets at the same time. This afternoon, Newsom noted that the Kansas City July-to-September futures spread "is closing in on par, and possibly a move to an inverse."

In layman's speak: "An incredibly bullish supply and demand situation, something you don’t often see in winter wheat. The market is telling us it believes there is more damage than the wheat tour is indicating."

DTN Grains Analyst Todd Hultman said it feels like the pictures swirling on Twitter are building a case for noncommercial traders to get involved with the market.

Newsom agrees. "Noncommercial traders may take a short-term shot at buying this market. Last week’s CFTC report showed a slight build in net-long futures position. However, history tells us that a short-supply scare is usually short-term. A spike to a test of its previous high of $8.67 could wash out the market."

Hultman added that he'd be a lot more comfortable with the market action if there were problems somewhere else in the world. So far, no serious issues have appeared, but dry conditions in Ukraine, southwest Russia and Australia bear watching.

"If this is all there is, then yes, we will see another bear market like 2013 where drought in Kansas is outweighed by everyone else," Hultman said. "The way that I look at this is that it is early in the year, and we already have one good drought -- like holding a pair of aces with three cards left to turn. There is still time for other problems to emerge."

If you'd like to follow the wheat tour on Twitter, please follow https://twitter.com/… and #wheattour14.

(CZ/SK)

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