Friday, November 19, 2010

Forecast Trends Mixed For Wheat

DTN's Bryce Anderson looks at weather trends and how its impacting wheat. The U.S. winter wheat crop is off to its weakest start in 20 years with a good-to-excellent rating in the mid-40-percent range.

Eastern Midwest wheat areas have a good chance for winter precipitation, but Plains wheat country has a less-favorable outlook. (DTN photo by Katie Micik)That's a far cry from the 64 percent good-to-excellent total put on by the crop a year ago. Ratings also indicate 17 percent of the winter wheat crop is rated as "poor" or "very poor" -- almost triple the 6 percent total of those two categories in November 2009.

While the wheat crop still has a long season to go, traders will look at the condition of the crop and upcoming weather trends as they evaluate what they think will happen to the world wheat supply.

DTN Analyst John Sanow noted that short-term fundamentals for world wheat supply and demand are bearish for immediate needs, but pose a question looking ahead to the second, third and fourth quarters of 2011. That places the overall wheat market weather factor at neutral.

Smaller world supplies than a year ago, due to drought in Russia and West Australia, along with flooding in Canada, bring an increased sense of urgency to the market's view of weather in U.S. wheat areas going into next year.

"Near-term fundamentals remain bearish for wheat, but traders will watch continued dryness in the Southern Plains closely along with other parts of the globe," Sanow said. "The market can ill-afford a large drop in world production for a second straight year. The situation grows less bearish longer-term, as indicated by the weaker carry in deferred futures spreads. This points to concern by the commercial side over future supply."

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