The Good: The Minneapolis – Chicago September spread has moved sharply significantly during the past three weeks. The spread has moved from nearly -20 cents to +15 cents at yesterday’s close. Spring wheat has rallied over that period and Chicago wheat has dropped which has widened the spread. The good news is that this spread should widen out during the summer months to the traditional 35 to 50 cents per bushel as demand for spring wheat remains strong. The conditions in the SRW growing areas remain very good for the wheat crop which is pressuring prices in Chicago. Rains in the Black Sea region are also increasing pressure in the Chicago markets as the trade expects a normal export program from the region.
The Bad: Stock markets are trading lower as the economic data continues to be dismal. A record drop in retail sales combined with increasing trade tensions have caused the markets to drop significantly during this week. The S&P 500 has posted losses in two of the last three weeks and has definitely formed a top after rallying off of the lows. Equity markets will need to see positive signs from the economy before a rally can begin from these levels.
The Ugly: There was news this week that shipments of gasoline were making their way to Venezuela from Iran this past week. This is essentially the same thing as selling sand to Saudi Arabia as it doesn’t make a lot of sense. The Maduro government and U.S. sanctions have hurt the Venezuelan oil economy so much that they can’t even supply their own transportation needs. Venezuela used to be a good customer for Canadian wheat and durum. This market will not likely return until their is a change of the regime in Venezuela.