I apologize for the old man's perspective, but after 39 years of working in the world of commodities, it still amazes me how quickly the near-unanimous opinion of a market can change.

The best quote I ever heard for describing markets came from an unlikely source. G.K. Chesterton was an author of Christian topics in the early 1900s and wasn't writing about markets, but could have been when he said, "The real trouble with this world of ours is not that it is an unreasonable world, nor even that it is a reasonable one. The commonest kind of trouble is that it is nearly reasonable, but not quite ... it is a trap for logicians. It looks just a little more mathematical and regular than it is; its exactitude is obvious, but its inexactitude is hidden; its wildness lies in wait." (https://www.goodreads.com/…)

Kansas City wheat prices had been lying in wait for several months until this week when they sprang their own trap on logicians. The July contract closed Thursday at $6.40 1/2, up nearly a dollar from its low in March, and is now at its highest close in 2024.

Had we taken a poll about wheat prices on April 16, the most recent day of CFTC data, we would have found a strong consensus of bearish opinions. Speculative traders were holding 42,523 net shorts in KC wheat, the highest short position on record. The price trend had been consistently down since early August; Russia dominated the world's wheat exports with low prices all through the winter and left the United States struggling to hang on to its lowest export total in more than 50 years. Among U.S. exports, HRW wheat was the worst of the worst with the most recent season export total down 28% from a year ago.

If all that were not enough, the International Grains Council estimated the U.S. is on track for a 1.94-billion-bushel (bb) wheat crop in 2024-25, the largest in eight years. Ten days ago, no self-respecting logician (market analyst) would have been bullish about wheat prices. The most bullish comments I could muster the past few months were that wheat prices were fundamentally cheap and that sometimes when specs are heavily short, surprises can happen.

Well, that's about as low probability a statement as one could make, but a string of surprises is exactly what hit the wheat market this past week. On April 19, SPGlobal.com reported 7.5 million metric tons (mmt) of wheat stocks were in India's government warehouses on April 1, the lowest supply in 16 years. (https://www.spglobal.com/…)

There was talk for a while last year that India may have to import wheat, but it never panned out. India works very hard to stay self-sufficient with its food supplies, but that may become increasingly difficult, depending on weather. The International Grains Council currently estimates India's 2023-24 wheat production at 108 mmt or 3.97 bb, possibly reaching 110 mmt in 2024-25. Rice production, the other staple, is estimated at 129.3 mmt in 2023-24, down from 135.8 mmt the previous year, and hoping to increase to 133 mmt in 2024-25.

After April 19, wheat and rapeseed crops across northern Europe were hit by sub-freezing conditions during the weekend and temperatures stayed below normal most of this week. It is too early to know how much damage might have been done, but the other stress on crops has been from too much rain in Western Europe. More rain is expected in France and the UK through next week. September milling wheat in France is up 18% from its lowest price in March and ended at 231.50 euros per metric ton Thursday, matching its highest close in 2024.

Here in the U.S., winter wheat crops got a small taste of frost in the southwestern Plains on April 21 morning. The damage shouldn't be as bad as what Europe experienced, but a small portion of winter crops were already headed and likely suffered some loss.

North of the U.S. border, it is no secret that Western Canada's Prairies have been mostly dry through the winter. With planting ready to pick up in May, the lack of soil moisture may start getting more attention.

Currently, the southern and northern ends of Alberta have the most extreme drought conditions. There are chances for light showers across the Prairies next week, but more will be needed.

The final threat to wheat crops on this week's list may have the most bullish potential for prices, if a change in weather doesn't rescue the season. Crop conditions are currently dry and temperatures above normal in eastern Ukraine and southwestern Russia -- the world's two low-cost providers of wheat. There are chances for light rains in the region next week and possibly more in the extended forecast, but the possibility of a smaller wheat crop in Russia, if it happened, would offer a lot of help to the world's other exporters, including the U.S.

This early in the new season, it is too early to be confident about how these weather threats will turn out and I can't yet say there are strong arguments for higher wheat prices beyond this week. However, compared to 10 days ago, it is remarkable how quickly these unrelated threats have almost simultaneously emerged and changed the conversation from overwhelmingly bearish to potentially bullish. For speculators holding record-short positions in KC wheat, the decision to get out is easy and the easiest part of the rally may soon be over.

How will world wheat production turn out in 2024-25 and will the U.S. have a better chance for export business in the months ahead? We are still a long way from knowing those answers. This week, I have to shake my head at how quickly market conditions have changed and tip my hat to Chesterton. The market's wildness has not gone away.

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Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

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