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Commentary

Minneapolis wheat was the clear winner this week with a continuation higher seen following last week’s close over the 50-week moving average while KC and Chicago saw muted action this week. Minneapolis wheat continues to push solidly higher on this week's disappointing crop ratings, providing modest support for Kansas City and to a lesser extent of Chicago.  MWN25 had a 31.50 cent trading range with gains of 19 cents with the majority of the gains the last two trading sessions. Spring wheat conditions earlier this week were well below estimates and Minneapolis broke out to a new one month high today and closed above the neckline of a head and shoulders bottom pattern. The weather outlook has favorable precipitation chances in the northern Plains upcoming over the next week. Relief may be coming. North Dakota is by far our number 1 Spring wheat producer at approximately 49% of total US Spring wheat production. The good to excellent rating for North Dakota is at 37% good to excellent. However, the poor/very poor is at 26%. Plantings of US spring wheat at a 55-year low, so the market maybe hypersensitive in the near term to a continued worsening in the good to excellent ratings that could prompt further short covering. The COT report from CFTC released this afternoon showed the following. Week on week had managed funds short covering approximately 7k Chicago wheat and were net short -101k as of this past Tuesday. In KC they did not do much buying less than 1k and were short -79k as of this past Tuesday. In the Minneapolis contract, funds also bought +3k in short covering are short -30k, although that number may be overstated given the end of week rally in my opinion. It is my view that Kc and Chicago will follow Minneapolis higher should deteriorating conditions continue in the Northern wheat belt.

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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