Top off the Wheat Market? 11/12/2020

The accompanying scatter study displays the fall – winter high in Chicago soft red wheat as a function of the US wheat carryout as a percentage of crop year food usage + exports.   We have marked the WAOB November ratio estimate and the current high for December 2020 futures. 

To generate old crop soft red wheat prices much above current highs could require moving to the left on the regression line. The only major variable in the old crop wheat balance is exports. China has been active in the wheat market but at a much less active pace than in the corn and soybean markets. The foreign  wheat deficit (production – usage) is positive based on the latest USDA data which argues against a surge in wheat export demand. 

New crop wheat production prospects are a little worrisome  as 2021 US winter wheat crop is off to a poor start. But in most years new crop concerns don’t become the dominant market force until the spring months.