Despite a lack of fresh dynamic market drivers, US wheat futures have seen volatile trade over the past three trading days following their Thanksgiving break last Thursday. On Friday they rallied 20 cents per bushel – equivalent to over £5 per tonne – which raised overall gains to more than 10% since mid November. This was supposedly triggered by cuts to yields in the primary wheat production areas of Argentina.
However, yesterday all of the gains made on Friday were lost as it became apparent that US wheat is too expensive to capture any substantial share of the current export opportunities. Russia highlighted their dominance in the international wheat trade, securing all business to Egypt in their latest tender. In addition, Egypt confirmed buying 295,000 tonnes at an average price of just below $236 including freight for January delivery and, although Russia was the most competitive, this was about $3.50 above the previous tender a fortnight ago.
Domestic wheat prices have eased lower as old crop trade slows. Existing shipping orders are almost filled and the UK market is priced out of fresh business. Mixed fortunes have been reported by farmers who have resumed their winter wheat drilling this week and the market is now patient to see how progress may fare through into the new calendar year. Meanwhile, sterling is continuing to firm against the euro, resulting in cheaper imports and more expensive exports. The domestic markets need to adjust to counter this and, with current farm prices well above the market lows that we saw in August, they still represent good value. Up to 2 million tonnes remains to either ship or roll over to next season and this will undoubtedly become burdensome.