Wheat: Boring...but, never sell a dull market short

Over the past few months, activity in the wheat market has been subdued, especially when compared with the volatility of its counterparts in the corn and soybean pits. It has traded in a relatively narrow range of 50¢ per bushel. Traders were focusing on the extremely wet spring in the U.S., which delayed both corn and soybean planting. While spring-wheat planting was running well behind the historical norm as well, it comprises only 27% of the total U.S. wheat crop. Winter wheat, which is planted in the fall and makes up the bulk of the U.S. wheat crop, was already nearing harvest during this period.

Although it does not receive as much attention, the spring wheat crop was planted late enough for some areas to miss the planting window altogether. Last year, planting was complete before the end of May. As of the most recent weekly crop progress report, only 92% of the crop was in the ground. On the other hand, prospects for yield have improved. The weekly report showed the good-to-excellent portion of the crop jumped by 6 percentage points from the previous week, to 68%. That compares with 76% last year at this time. Last year’s growing season was marred by severe drought, however, and by the end of summer, the final crop rating dropped to 61%. So it’s too early to draw any conclusions.

The much bigger issue is the quality of the winter wheat crop. It was a harsh winter for the key winter-wheat states. As the crop emerged from dormancy, the damage was evident. The most recent weekly crop progress report shows the good-to-excellent portion of the crop at a scant 31%. That’s down from 54% at this time last year. The harvest has been slowed down by the same wet weather that has affected planting across the U.S. Only 11% of the crop has been harvested, compared with 51% at this time last year and the five-year average of 25%. U.S. production levels for the combined winter- and spring-wheat crops remain vulnerable.

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