The USDA Crop Production for winter wheat and the Supply/demand update should set the tone this week. While some damage and lost acres may lower the supply, the upside action has been minimal as traders see record world stocks as a key bearish force. Both Chicago and Kansas City wheat struggled yesterday with pressure coming from a higher dollar and mostly steady crop condition report on Monday. The winter wheat crop was rated 53% good/excellent, down 1% from the previous week and above what traders were expecting after the recent cold/snow event in the Plains. The weather forecast continues to point to a wet pattern over the next two weeks and could continue to put disease pressure and quality concerns on both hard and soft red wheat. India’s wheat production was raised to a record 97.44 million tonnes from 96.6 million according to the Farm Ministry.
Mexican companies are looking to purchase 30,000 to 50,000 tonnes of Argentine wheat this week as they test alternatives to US grain supplies. Taiwan bought 96,000 tonnes of US milling wheat for June shipment, Japan is tendering for 138,000 tonnes of US, Canada or Australian wheat and Algeria issued an international tender for 50,000 tonnes of soft wheat. French officials lowered old crop ending stocks to 2.4 million tonnes from 2.6 million previous. The USDA will release the May crop production report today with the average estimate for winter wheat production at 1.308 billion bushels (range of 1.200-1.617 billion) and all wheat production at 1.858 billion bushels (range of 1.775-2.022 billion). The 2016-17 ending stocks are estimated at 1.160 billion bushels (range of 1.144-1.199 billion) and new crop ending stocks are estimated at 930 million bushels (range of 779 million-1.160 billion). For world ending stocks for the 2016/17 season, traders see wheat stocks at a record high 252.16 million tonnes from 252.26 million as the April estimate. For the new crop season, traders see a drop to 246.1 million tonnes (range of 238-257 million).
TODAY’S MARKET IDEAS: July wheat closed at the lowest level in eight sessions with weakness coming from a higher dollar. The market is damaged with the stochastics crossing over and turning down Friday. With the wet forecast and potential for disease and yield loss still an issue, the market should stabilize against the 420 level. July wheat close-in support is at 426 1/2 followed by 424 1/2. July KC wheat support is at 435 1/2 with 447 1/4 and 451 1/2 as resistance.