U.S. wheat futures found support from the weekend’s sub-zero temperatures in the central & northern plains and Midwest, as the threat of winterkill was debated today, with nearby Chicago closing up 6.50 cents, Kansas City up 7.50 cents, and Minneapolis tagged along to close up 3.25 cents. The cash markets have been supporting the Mar/May spread in Chicago, which settled 0.50 cents higher, at -12.75 (51% of full carry), in spite of coming under selling pressure at the close. The new running average percent of full carry for the WH-WK spread is 51.84%, requiring the spread to have an average settlement price of less than or equal to 49.54% of full carry (12.34 cents) in order to trigger a VSR decrease. The KC Mar/May spread was similarly supported by today’s rally, closing up 0.50 cents, at -13.25 (90% of full carry). The new running average percent of full carry for the KWH-KWK spread is 90.75%, requiring the spread to have an average settlement price of at least 11.39 cents (77.31% of full carry) for the remaining 36 days of the calculation period in order to trigger a VSR increase.

Monthly crop condition ratings showed a marked decline in several key winter wheat states following a very dry December. Given the abnormally dry conditions and late planting, the crop is potentially more susceptible to winter kill. The effects of the latest freeze event will not be known for some time, but the threat of damage is real. The consensus is winter wheat area is down this year and we’ll have a better idea of how much reduction there was next Friday, when USDA releases their seeding report.

There are more supportive arguments today than in recent weeks, as focus begins to shift to new crop, particularly for Kansas City HRW, where Managed Money is holding onto a record net short position (34 thousand contracts). The KWK-KWN spread finished the day at a 16.50 cent carry, which, if you assume one VSR trigger on the KWH-KWK, is 87% of full carry.