The Good: The spring wheat market finished higher today as the market began to figure out that the rains in the eastern Dakota’s and western Minnesota have been disappointing. The disappointment includes parts of Manitoba and Saskatchewan as well. There still is a chance for more rain this weekend so we will see what the market sentiment is on Monday. For now, drought concerns are working there way back into the spring wheat market. The market has now retraced back to values that were present a month ago. Perhaps we are establishing a bottom in the spring wheat market for now until the weather picture becomes clearer for the Northern Plains and Canadian Prairies.
The Bad: Imagine you are a poor Kansas wheat farmer. The crop tour through the state this week came up with a yield of 58.1 bushels per acre, which is an all time record. The Kansas City July contract dropped nearly 33 cents per bushel before the tour ended. The HRW July futures today settled down one cent today at US#6.24 per bushel. This is the eighth consecutive day of declines in the Kansas City wheat contract, which has pushed July futures below corn. I can already hear the feed mills licking their chops for some cheap wheat to compound into rations.
The Ugly: Much of the increase in commodity prices have been driven by fundamentals, but the U.S. dollar has also played a role. The dollar index hit a low in early January of 89 points and then proceeded to rally to over 93 points by the end of March. The index has moved almost in a straight line down to the 90 point level. It appears that the dollar index is stabilizing around the 90 point level, which would reduce the tailwinds caused by the weaker U.S. dollar. This is one of the reasons that commodity markets seem to have stalled out this week.