SLOW HARVEST START LEAVES CASH WHEAT MARKET EDGY

SLOW HARVEST START LEAVES CASH WHEAT MARKET EDGY

Wet conditions have kept the initial hard red winter wheat harvest rather slow in Texas and southern Oklahoma, with the industry eagerly waiting for activity to move to the rest of the HRW wheat region so stocks can be replenished.

Hand-to-mouth buying of old-crop cash wheat has developed, as buyers try to bridge the gap left until newly harvested supplies become available. This has spurred erratic strength, with wheat millers and elevators buying only what they need at the last possible moment.''Millers are buying what they need for today, then backing away from the market," one cash wheat broker said.

Wheat has moved in unusual patterns in the domestic markets during the 1989-90 marketing year (June-May), with aggressive mill demand for the drought-reduced stocks having in many cases set the market, merchants widely agreed.

Therefore, there is potential for some last-minute demand for old-crop wheat because of recent wet weather from Texas into Kansas. When recent heavy rains eliminated the chance for an early harvest and kept the Kansas harvest to a normal mid- to late-June time frame, basis levels firmed, especially for northern locations such as Kansas City, and hedge pressure in futures eased.

The Kansas City ordinary protein hard red winter wheat cash premium since mid-May has rallied about 30 cents a bushel in a thin market, which brokers say could collapse once new-crop supplies are near, but also could surge until then.

With wheat bins basically bare, the unusual movement of old-crop wheat

from Oklahoma into Kansas City last week was just another example of how the classic wheat marketing pattern was scrapped to meet current conditions, merchandisers said.

Wheat millers should remain the most aggressive buyers of new-crop wheat as it becomes available, but their demand is still expected to be hand-to- mouth. The millers are apparently waiting for the cash basis to fall when additional new-crop stocks enter the cash pipeline.

Elevator terminals are expected to be more patient initially, wanting to buy at cheaper levels. The unpredictable wrinkle in this scenario is the available elevator and on-farm storage space, due to the reduced stocks situation resulting from last year's drought.

Farmers have forward-contracted much less new-crop wheat than normal ahead of harvest. This was linked with the wheat price decline from last year's drought-driven rally, which creates a conservative bent among farmers after the preceding crop fails. Another factor hasbeen the recent rain, which tempered aggressive marketings until farmers had new-crop supplies in hand.

Cash basis bids are expected to drop significantly into first-half July shipment, which is when Kansas and northern Oklahoma supplies are expected to arrive in the market heavily.

Export sales for new-crop hard red winter wheat have been slow, merchants said.

Feedlot operators are also monitoring new-crop wheat prices to determine what kind of grain to feed their cattle this summer.

Recent rain - unwanted at this point - is another in a long line of natural obstacles that have eliminated any sense of "smooth sailing" for wheat farmers in the south-central Plains over the last few years. Drought, Arctic blasts, and a wet harvest cut the wheat crop dramatically last year. This year, those same conditions loomed but abated at key points and the crop recovered dramatically.