MarketsFarm — A number of factors have come together to underpin North American wheat prices, with more room to the upside after a rally in all three U.S. futures markets to start the week, according to an analyst.
Chicago, Kansas City and Minneapolis wheat futures all started the week with double-digit gains. The Chicago and K.C. winter wheat contracts hit their best levels since the summer, while Minneapolis spring wheat lagged to the upside to trade at its highest levels in a month.
Market analyst Bryan Strommen of Progressive Ag at Fargo, N.D. said wheat prices were benefitting from a number of bullish influences.
Dryness in Australia and Argentina, an increase in Argentine export taxes and mounting drought concerns in Texas were all supportive for wheat prices, according to Strommen.
Improving trade sentiment was also supportive, with recent movement on both the China/U.S. deal and the new North American trade agreement with Canada and Mexico.
Extreme wetness at seeding time limited U.S. winter wheat seedings in the northern U.S., while adverse harvest weather also hurt the quality of the North Dakota spring wheat crop.
Heavier deliveries into the elevator system at harvest time also put added pressure on prices that has now subsided as farmers shut their bin doors, Strommen said.
While prices have shown some strength recently, he said spring wheat bids would need to move higher in order to generate interest in seeding the crop this spring.
Anecdotally, he had heard of seed dealers who were already selling out of spring wheat seed at this time a year ago but had sold little, if anything, this year.
With MGEX March spring wheat settling at US$5.3525 per bushel, he said the US$5.60-$5.70 area was a good upside target. “If we get there, a guy will have to look at it.”
— Phil Franz-Warkentin reports for MarketsFarm, a Glacier FarmMedia division specializing in grain and commodity market analysis and reporting.