18th April 2018
US wheat closed slightly higher yesterday but that follows four previous consecutive sessions of sharp losses. US crop ratings released this week show a 1% increase on last week, rated at 31% good/excellent but this is still very poor compared to 54% a year ago.
There is some rainfall expected for winter wheat areas, with Texas and Oklahoma potentially getting 1.5 inches at the end of this week but some of the rain has been moved out of the forecast for Kansas and Colorado, leaving them with 0.5 inches or less. Clearly forecasts and actual rainfall remain a big watch-point for US winter wheat prospects after a long period of drought. Spring wheat plantings in the Northern US are also having issues, with only 3% planted versus 12% this time last year because of heavy snow cover preventing field work.
Matif wheat closed slightly higher yesterday. Weather conditions across Europe and the Black Sea look generally favourable for the rest of the month, which should allow for decent growing conditions. MARS have raised their expected EU 2018 wheat yields to 6.23 tonnes/ha, from 6.20 t/ha estimated last month.
There have been some tricky conditions prior to this improved forecast however, with heavy rain throughout the winter and early spring. There have been some reports from Germany relating to a 25% drop in their wheat acreage as a result. However, other sources believe that losses are closer to 5%, which would only have a small impact on the overall EU wheat crop number. The German Cooperative Association has released a forecast predicting the wheat crop to be 24.21 million tonnes, 0.8% lower than 2017.
London wheat ended £0.40/t higher yesterday at £147.90/t for May 18, during the day £148/t traded which was a six-month high. Sterling was strong yesterday morning, touching levels not seen since before the Brexit vote but this couldn’t be sustained following this morning’s headlines of UK inflation rates falling to 2.5%, the lowest rate in a year. Sterling has since fallen 0.5% and 0.7% against the euro and dollar respectively. This is supporting UK wheat currently.
Weather has taken a definite turn in the right direction, allowing land work to finally get going this week. While light land farms were in full swing yesterday, heavier land will need a few days to dry enough for it to be suitable to travel on. This has inevitably seen farm sales of wheat slow down, but this morning wheat firmed again and good values are available as conditions start to allow some better optimism for crop prospects.
It was a rare day of green on MATIF yesterday. However, with the expiration of the May futures contract coming up, old crop cash markets will detach from the futures and simply be where farmers are willing sellers versus crush buying levels.
There is little talk or action on new crop but brighter weather may prompt price checking and/or selling.
Following the news of falling UK inflation, we’ve seen a little support for local values.