The Good: The spring wheat market has finally emerged from the slumber it has been in for the past month! Although all wheat markets are stronger this week, spring wheat futures have been leading the way as the market increases the dry weather premium in old and new crop positions. There is still a way to go in increasing the spring wheat premium back to “normal”values. Spring wheat futures need to move another 25 to 40 cents per bushel relative to Chicago wheat to get the spread (September contracts) even close to “normal” levels. Until we see general spring wheat rains one could argue that the spreads need to widen even further.
The Bad: Although Kansas City futures were up this morning, the spread to corn continues to narrow. The July Kansas City wheat – Chicago corn futures closed the day at 3.5 U.S. cents per bushel. Not surprisingly, this is the lowest value since July 2012 and 2013. The spread should be the narrowest in the July position as it represents a new crop wheat versus old crop corn contract. The futures market is trying to push HRW wheat values low enough to maximize wheat feeding. The job has been largely accomplished as the spread is now approaching long term lows. This is important for the wheat markets as the direction of the Kansas City market will be largely determined by the gyrations in the corn market. Wheat feeding will need to be maximized until the availability of new crop corn in late September/early October.
The Ugly: A major storm is moving through the western Corn Belt over the next two days with heavy precipitation expected in the eastern South Dakota, western Iowa and western Minnesota. These regions are primarily corn and soybean producing areas and spring wheat regions will still remain dry into the weekend. The western Corn Belt is quite dry and the 25 mm to 75 mm expected across the region will be welcome. Corn planting will pick up pace when the crop insurance dates for early planting (mostly April 15th) are reached just over a week from now.