Fundamentally you need to keep your eye on Australian wheat weather. After a rather optimistic beginning to the 2008 Wheat planting season and visions of a record breaking 27 million metric tonne production outlook, weather is becoming drier in that country. Net drying is expected this week for the major wheat production belt with the exception of Victoria, which accounts for 12% of the country's annual production. What do you think the likelihood of the worlds #2 wheat exporter to have three consecutive devastating droughts?
Spring wheat planting progress is said to be 58% complete versus 34% the previous week and a five-year average of 62% complete. Number 1 spring wheat producing state, North Dakota planting progress is 58% versus a 54% five-year average and #2 producing state Minnesota at 19% planted versus a 64% five-year average.
The winter wheat crop condition report was released for the fifth time in 2008 on Monday. The 18 states, which made up the majority of 2007 production came in at 47% good to excellent compared to 46% the previous week. One year ago, conditions were 57% good to excellent. The trade was anticipating today's report to come in unchanged at 46% good to excellent. The five-year average suggests for the next four weekly reports, conditions decline nearly a total of 4%, suggesting a target in four weeks of 42% good to excellent rating, 11% below year earlier levels of 53% good to excellent and 3% below a five-year average of 45%. Since 1989, for May 4th, the weakest good to excellent crop conditions was 21% in 1989, and the best of 78% in 1993.
Even though present US winter wheat crop conditions are less than average, globally the crop is doing well and headed towards larger production than year ago levels. World wheat stocks are expected to rise to 128 million tons in 2008-09, up 14 million tons from 2007-08. At this juncture, Allendale is willing to sell corrective rallies via call options and or futures.
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