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Commentary

Kansas City and Chicago wheat closed higher today with Minneapolis lower. The wheat market started lower this morning but found buyers on the break and closed moderately higher, led by the Kansas City contract. July KC wheat does appear to have found some support at the psychological significant $5.00 level in my opinion, bouncing back nicely yesterday after touching it briefly. Todays close in July Kc finished 23 cents off yesterday’s lows.  Yesterday's crop tour across northern Kansas found higher than average yields but today's route across south-central and southwest Kansas has found more disease pressure. It is our opinion that some of the end of session strength in the KC market was worry over the disease pressure in Kansas that is being seen on the wheat tour and comments that wheat is now being cut for hay or silage along with some fields now being zeroed out by insurance due to the drought. Crop scouts are citing the wheat streak mosaic that is more widespread than thought earlier. The mosaic is a virus that has the potential to ruin the whole crop in theory, but often times the effect is much less harmful. Is this crop a disaster? Far from it, but there are concerns now that increased potential exists that it does take the top end of the crop off. Similar in my view to what happened to corn and beans late last year. The weather maps do bring back hot and dry for much of the wheat belt that will both accelerate maturity but will also bring the disease issues into more clarity in my view. The market particularly US origin wheat has gotten too cheap versus World export values. Funds are heavily short so look for the short covering to take the market near 550 in Chicago and 560 in Kc which if it occurred would put values unchanged on the year. From there in my opinion, the wheat is going to need a continued weather story or new demand that enters into the market in the form of trade deal from a nontraditional buyer for decent size. Last WASDE report put ending stocks above 900 million bushels. That type of carry has put all wheat classes with a $4 handle. Last time we had ending stocks that high, was pre pandemic. This market needs a sustained story to counter harvest pressure that starts in June for the winter crop.  

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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