Corn is one of the hottest commodities outside of oil and gold this year as late plantings from inclement weather continue to drive super returns for investors. Those who had missed the maize party may have yet another buy-in opportunity in grains now: wheat.
Wheat 15-Min Chart
was the star of the day on the Chicago Board of Trade on Thursday, with the spot September Chicago contract gaining almost 17 cents to settle above $5.21 per bushel. The rally came on the back of the U.S. Department of Agriculture’s move to slash Russian wheat production by 3.8 million metric tonnes to a new estimate of 74.2 MMT due to drought.
Chicago Wheat’s Fortunes Transformed By Russian Crop Anomaly
Jeff Kaprelian of the Hueber Report consultancy in St. Charles, Illinois, summed it up in a note on Friday:
“Thanks wheat! After today’s USDA report that’s what farmers should be saying.”
“Or perhaps, more appropriately, ‘spasibo pshenitsa’ since the USDA … helped put world wheat ending stocks at the low end of estimates and 7.88 MMT lower than last month’s report.”
With Thursday’s tick up in CBOT wheat, the market is up just 3.4% on the year, presenting a fairly low entry cost versus relative return opportunity for would-be investors, compared with Chicago , which already carries a year-to-date gain of more than 18%.
Investing.com’s Daily Technical Outlook has a “Neutral” call on CBOT wheat, projecting a top upside of above $5.51. If that 30 cent per bushel premium is achieved, that would already be an additional gain of nearly 6%.
From Australia To Ukraine, E.U. And the U.S., Wheat Is Under Stress
The USDA World Agricultural Supply and Demand Estimates (WASDE) report from Thursday also projects lower wheat exports for Australia and Ukraine that creates further opportunities for the crop in the E.U. and the U.S.
But that is notwithstanding crop conditions in the latter two, which are also facing their own adverse weather dynamics.
Said Jack Scoville, chief grains analyst at Chicago’s Price Futures Group brokerage:
“There are forecasts for hot and dry weather in the Midwest. Drier weather is forecast for Canada.”
“It is still hot and dry near the Black Sea so crops in these areas of Russia and Ukraine are being hurt. It is almost harvest time for Winter crops in these areas. Conditions are very hot in Europe and kernel fill could be affected.”
Corn Still In Rally Mode, But Wheat Offers Lower Entry Cost
Corn itself is still in rally mode, said Scoville, citing crop development that’s “way behind”.
“The root structure for much of the corn in the Midwest is not good due to the previous wet weather.”
“USDA showed that crop condition was as expected, but that the crops remain very late. It will take a very late fall to get the crops home with no additional losses as there is a long way to go. It is warmer now so the crops have a chance to progress, but rain will be needed frequently due to the poor root structure as the crop got planted in mostly very wet conditions.”
Kaprelian, however, urges investors not to “read too much into these numbers” issued by the USDA for corn, as there were also gains to be made in other stressed crops such as wheat.
“The market recognizes the USDA is re-surveying acreage now and the yield is a complete guess. At the same time, we shouldn’t be too hopeful for a dramatic reduction in acreage. The USDA has defended their 91.7 million acre number and they won’t likely make fools of themselves.”
Investing.com’s Daily Technical Outlook for corn still suggests a “Strong Buy”. The top upside of above $4.68 forecast for CBOT’s benchmark corn for September would mean a 5.4% premium from current levels – slightly lower than wheat’s.