Chicago wheat futures closed slightly lower on Friday but still showed a net gain of 2% on the week. After starting lower early last week, wheat fought back with gains driven by more bad weather in Australia and rising black sea prices. The US spring wheat harvest is nearly finished, now at 97% complete and winter wheat plantings are 13% complete – more or less in line with the average.
Australian wheat prices rose strongly again on the back of more bad weather. They have had heavy frosts with temperatures recorded as low as -9 degrees Celsius. The September rainfall has been extremely poor and the forecast remains dry for the foreseeable. There has been talk of the frost damage knocking another 1-2 million tonnes off the crop size. Livestock farmers are paying huge prices to replace forage and keep their animals fed and this will keep wheat away from the export market. Argentina is still in need of moisture, as the rain they have had missed key central wheat growing areas.
Matif futures followed the US to a higher close over the week. EU exports are running 41% behind last year's pace; they are not competitive versus Russia and Ukraine and it is difficult for EU export values to come down when their domestic markets are stronger in light of the reduced crop size. Europe and the Black Sea are looking at dry planting conditions currently, with forecasts remaining warm and dry for the most part of this week. Russia's prices have risen over the last week and there have been some delays with quality certificates. This could be a possible indication that a slowdown in Black Sea supply is becoming more likely. As of the 13th September, Russia had shipped 10.2 million tonnes, which is a fiercely fast start to the season. News reports from a conference of Moscow meat producers voiced concern over the fast pace of exports, warning that if it continues it could disrupt supply for domestic consumers.
London wheat closed 0.85/t higher on Friday, taking net gains over the week to £4.20/t on Nov 18 (£176.35/t). Farm prices fought back nearly £5/t after a month that has been in a downward trend up until last week.
It was a volatile week for currency. Sterling was stronger up until Friday when, following what seemed like another Brexit setback, we saw a reversal which helped wheat to close higher on the day. This morning, markets were still finding some support and small gains have started the week.