Wheat - Wow, what a week!  With little in the way of any kind of supportive fundamental changes, we have seen quite a rally in the wheat market.  Fund traders have been rather complacent about wheat for some time, but changed that attitude on Thursday.

On a day with only adequate export sales and continued good harvest weather, commodity fund traders decided that wheat was the place to be.  Buy stops were triggered as the market moved higher and an uphill domino effect was in place.  It was a sharp, counter-seasonal bounce that needs to be taken advantage of.

The USDA, though, threw a curve at those bullish wheat traders this morning with both the planted acres and stocks reports.  All wheat acres were listed at 60.1 million acres.  That’s more than a million acres higher than the March indication.  The biggest increase, by far, came in spring wheat, but winter wheat also showed a small increase.  Wheat stocks were reported at 772 million bushels, which was above both the average trade guess and even the highest in the range of guesses.  Indicated disappearance of wheat for the last quarter was 5% below year ago levels illustrating the slow wheat movement we have seen.

Hidden a bit by today’s reports was a release showing U.K. wheat production at a record 17 million tonnes.  That’s almost double last year’s level.  The European Union (EU) as a whole is expected to produce 18% more wheat than last year.  There was a bit of bullish news with the Canadians calling for their wheat crop to be lower than last year, but it was more than accounted for with increased EU production and US acres.

There are growing concerns about hot and dry conditions in US spring wheat areas, but an extra million acres allows for a little production loss while still maintaining current production expectations.  Today’s report will not be seen as positive to the wheat market and leaves strong corn and bean trading as the only real supporting legs on which the wheat market can stand.

Thursday’s trade took the market to a level we would not have imagined only a month ago.  But it goes to show that we do not know where the market is going.  We can only prepare for the eventualities of our anticipated market moves, while leaving open the possibilities of a surprise move.  I did not expect this much strength with harvest yields (the real ones) being reported at levels larger than anticipated.  Weather is still the key, even in wheat.  Corn’s support of wheat and spring wheat production is what the weather guru’s will be watching.

Corn - I hope no one in the USDA got whiplash with the quick turnaround that was seen in this morning's acreage report.  We have fundamentally changed our feedgrain outlook with much higher acreage numbers to plug into our projected carryout calculations.  That adjusts the picture considerably.

If you will remember on June 14, my newsletter was talking about how odd it was that the USDA would have gone ahead and decreased planted acreage in the regular June S&D report.  Many in the trade thought that this million-acre decrease was just the precursor to a larger adjustment downward in the June 28 release.  Those thoughts were incorrect as those acres were added right back into the mix this morning.  The surprise in the trade was evident immediately. 

Weather is still a very big deal as hot and dry temps are forecast through the 4th with cooler and wetter conditions seen after that point.  If you’re a trader, which way to go?  More acres mean that it will take even more poor production weather than seen now to effectively reduce carryout.  But that poor weather is occurring right now.  Will it stay hot?  Will it rain on cue before pollination?  Friday was a confusing day in the market with both stronger and weaker trading seen. 

Increasing hot and dry weather concerns in the western cornbelt, where the “good” corn is, have provided for a sharp run up in the trade this week.  Decent, although not excessive, export sales have bolstered the position.  The weakening of the dollar makes our production more affordable, but we have rallied more than the dollar has declined.  What today’s reports have done is to lower the ceiling of a potential weather rally but current weather keeps a portion of that upside potential intact.

Soybeans - Just as in corn, the whiplash factor must have been huge in Chicago and around the country today when traders saw the USDA’s planted acres number for soybeans.  With so many private analysts looking for a million or even two million acre increase in soybean plantings due to switching from corn, the decrease was a shock. 

Today’s planted acres represent an actual decrease of 33,000 acres from the March release and is 600,000 acres below the June S&D report of 16 days ago.  The reaction of the trade to any report is gauged by the difference it holds from the trade’s expectations.  Today’s difference was a huge million acres.

With today’s June 1 stocks report also coming in at the bottom end of the range of trade guesses, the bullish potential was big.  This release brings to the forefront the possibility of very short carryout by the time we get to August of ‘03.  Thus, the double digit gains in the bean market today.

Reportedly there was heavy hedging on the part of South American soy producers in Chicago today. Regardless of our decreased production prospects, they are still sitting on a record crop.  And it is a crop for which sales are running behind the normal pace.  With all of the economic problems, there will still be a fair amount of South American beans available for sale this fall at the time that we (US) will normally have the world market to ourselves. 

China did actually make the US soybean sales ledger this week with a 55,000 tonne purchase.  Additionally, the Chinese are making noise like they are going to reformulate their intentions to drastically slow soybean purchases.  Whether they do or do not remains to be seen, but it is an issue to be watched.