US wheat started last week lower, pressured by funds exiting long positions in wheat. However, midweek saw some support come back into the market, lifting it to a higher close over the week. The lift came from Russia's announcement to cap wheat exports at 25 million tonnes and an all-grains total of 30 million tonnes. The USDA currently has Russian wheat exports estimated at 35 million tonnes, meaning 10 million tonnes needs to be reallocated to other exporting nations in their balance sheet. It is expected that some of this demand gap will be filled by US wheat which supported US futures. Further gains came on Friday when Statistics Canada released a crop estimate of 29 million tonnes – 3.5 million tonnes below the USDA estimate of 32.5 million tonnes.
Australia has been getting some very welcome rain which should help to boost crop conditions, although they have also been having some much less helpful frosts in some areas, with some suggesting frost damage in Victoria. Argentina is one part of the world that seemed to escape weather issues through the spring but they are now looking very dry as the crops enter the critical reproductive stage of development. There, crop ratings have dropped to 47% good to excellent versus 70% this time last year, soil moistures are low and there is no rain in the short term forecast.
Matif wheat fell to a five-week low early last week, before recovering all the losses to close slightly higher over the week following the Russian news. There are also some questions around Ukraine's export potential, it is expected that only 35-40% of their crop can make milling which could change the feed versus milling weighting of their export campaign.
London wheat closed at £182.50 (Nov 18) on Friday with gains of £1.90 on the day and £2.50 over the week, effectively halting the past fortnight of declines. This morning is firmer again, with weaker sterling helping.
With stocks tighter this season markets are more volatile. This has been illustrated this week with a jump of £5/t added to farm prices in reaction to the week's news, which has refocused attention on a tight UK feed supply situation.
Spot demand for milling wheat has been supported over the week as September cover is in demand. This short term support to milling premiums looks like a good opportunity for farmers in light of the fact that supply of good quality Group 1 milling wheat is plentiful in the UK this year.