4th June 2018
US wheat moved lower over last week. Winter wheat crop ratings improved for the fourth consecutive week and early harvest yields were slightly better than expected. The forecast for Canada turned better, with much needed rain arriving and the USDA published their initial grading for US corn at 79% good to excellent – well above the five-year average of 70% and the best initial grading since 1994. The weather for this week shows continued dryness and building heat for the US Plains. Funds now hold net long positions in wheat, having turned around the shorts that had been a feature for many months previously.
The forecast for Australia remains completely dry, they have had a very dry start to their planting season and as a result, Rabobank have reduced production estimates to 22.9 million tonnes which would see exports drop to 15.5 million tonnes – the lowest number for nine years. Brazil also remains dry but Argentina is getting continued showers. The Buenos Aires Grain Exchange (BAGE) put Argentinean plantings at 8% complete last week, which is behind last year’s 11% at this time last year and they have a higher projected area to get in for this season of 6.1 million ha.
Matif surged to 11-month highs at the beginning of last week on the back of a weak euro but ended with a small net loss over the week. Weather issues are becoming a bigger watch point for Europe and the Black Sea. Heavy rain and hail storms hit Western Europe last week and in the North East it has been very dry, with soil moistures now at low levels. The European Commission cut EU wheat production from 141.5 to 140.3 million tonnes in its monthly forecast. Rabobank reduced the Russian wheat crop to 75 million tonnes from 76 at the last estimate. Last year’s crop was 85 million tonnes so they are talking about a potential 10% drop in production. There are also production drops talked of in the Ukraine after similarly dry conditions have hampered crop potential. Weather looks to remain dry for this coming week.
London wheat closed lower on Friday with Nov 18 closing at £158.25, down 80p on the day which took it back to unchanged on the week. The same position reached new contract highs of £161.50 last Tuesday but saw the gains slide away through the rest of the week as the US moved lower.
New crop markets are all about the weather and therefore are subject to rapid changes as forecasts around the world alter. With the US harvest starting, much of the damage there is already done, putting Australian and Black Sea weather at the forefront for the coming weeks.