Frontrunner

Price volatility for the world’s wheat markets continued this week. After initially making a sharp recovery following last week’s slump, ultimately wheat markets failed to hold onto their gains. This was highlighted by London wheat futures, which increased by £8/t at their peak midweek before subsequently losing two-thirds of that rally.

Contrasting fortunes for potential wheat yields across the Northern Hemisphere are contributing to this choppy trade. Much of Europe, the Black Sea and central and southern US producers look set for promising crops. In contrast, much of the northern US and the primary spring wheat producing states, North and South Dakota, are gripped by extreme drought with weather primarily forecast to continue to be hot and dry. The US spring wheat condition dropped two points on the week to just 43% rated ‘good’ to ‘excellent’ compared to 80% which achieved this rating last year. This crop has the worst condition index since 1988. 

Hosted on Acast. See acast.com/privacy for more information.

US Chicago Board of Trade (CBOT) wheat and corn futures have been particularly volatile this week. Spring planting has advanced at a fast rate which has encouraged notable long liquidation from market speculators. Spring wheat planting reached 94% complete, which is well ahead of the 85% average for this time of year. Meanwhile, corn planting advanced to 90% complete compared with the 80% average.

Some analysts predict that US farmers will expand their corn planted area to over 96 million acres, which is well ahead of the prediction of 91.1 million acres from the United States Department of Agriculture (USDA) in its May World Agricultural Supply and Demand Estimates (WASDE) report. The pace of planting and historically high prices support the higher estimate. 

Hosted on Acast. See acast.com/privacy for more information.

World wheat markets have fallen again this week as a result of the pressure of improving production potential for some of the world’s primary exporters. Chicago Board of Trade (CBOT) wheat prices are now 10% below their end-of-April high and London wheat futures hit a low at £21.50/t beneath their recent peak.

Conversely, US winter wheat prospects look particularly upbeat following this week’s annual Kansas crop tour. Yields for the south west of the state are seen at 56.7bu/a, which is significantly higher than the five-year average of 42.7bu/a. There were similar results from northern Kansas, which is the primary US winter wheat producing state; it is set for a crop with a record yield. 

Hosted on Acast. See acast.com/privacy for more information.

The United States Department of Agriculture (USDA) published its May World Agricultural Supply and Demand Estimates (WASDE) report this week, updating its current season balance sheets and its first estimates for next season. The markets were particularly keen to see how the USDA would assess corn production prospects for Brazil.

Late drilled crops are now suffering from an almost complete lack of rain, low soil moistures and rising temperatures. Despite the planting difficulties and obvious adverse weather, the USDA has previously failed to make changes to its crop estimate. However, this time it has made a notable cut of seven million tonnes, now reducing its wheat crop estimate to 102 million tonnes. 

Hosted on Acast. See acast.com/privacy for more information.

Hosted on Acast. See acast.com/privacy for more information.

Hosted on Acast. See acast.com/privacy for more information.

Persistent cold dry weather affecting much of the US and Western Europe coupled with ongoing Chinese demand drove wheat and corn markets sharply higher this week. Chicago Board of Trade (CBOT) wheat futures have gained over 8% since last Friday’s close and are trading over $7 per bushel, bringing them to their highest level since May 2014. European new crop wheat futures have been equally impressive, setting new contract highs. London November 2021 wheat futures are now £26/t above their end of March low.

US winter wheat crop ratings were unchanged on the week with 53% rated ‘good’ to ‘excellent’ which is four points below last year. However, subsequent reports from Oklahoma of frost-damaged winter wheat helped galvanise speculative buying. Corn planting reached 8%, which is average for this time of year, but the cold US weather conditions are seen delaying crop establishment and yield potential, therefore adding more demand for depleted old crop supplies. Record low April temperatures coupled with a lack of rain is increasingly concerning for wheat crop production potential in Western Europe.

Hosted on Acast. See acast.com/privacy for more information.

Wheat markets continued to rise this week, reacting to increasing concerns for wheat crops as dry and very cold weather persists in Western Europe and parts of the US. The latest US drought monitor maps show an increasing area of extreme drought now impacting on over three-quarters of major spring wheat state, North Dakota. However, spring wheat drilling in the state achieved 8% completion by 11th April compared to the 2% average for this time of year. Nationally, spring drilling is 11% complete compared to the 6% average.

Dry cold conditions remain in the forecast and US spring wheat futures rallied to new contract highs this week. In contrast, the central southern plains are due rain which will benefit winter crops. The condition of winter wheat crops remains unchanged at 53% rated ‘good’ to ‘excellent’. Record low April temperatures have been prevalent in France and the UK. How damaging this has been for cereal crops remains to be seen. With more dry weather forecast for Western Europe, new crop wheat futures rallied to new contract highs. London new crop wheat futures have added a significant £15/t to their values since their lowest point in March, bringing them now to their highest values this season.

Hosted on Acast. See acast.com/privacy for more information.

On Wednesday 31ST March, the United States Department of Agriculture (USDA) published its quarterly US stock and acreage report. It contained bullish data for corn that triggered a sharp price rally for Chicago Board of Trade (CBOT) corn futures, sending them to new contract highs; the highest level seen since 2013. Despite the report having bearish wheat data, wheat futures followed corn futures higher, ending the recent slide in prices that had dropped to a three-month low prior to the report.

In recent weeks, analysts have been very upbeat about US famers reacting to high corn prices and significantly increasing the corn area they plant this spring. Estimates have been as high as 94 million acres compared to 90.8 million acres last year. At its Outlook Forum in February, the USDA saw US farmers planting 92 million acres of corn. Average trade guesses before the report were 93.28 million acres. However, in the report, the USDA has revised its estimate with only a small increase on the year, bringing the new predicted acreage to 91.144 million acres. Using trend line yield data, this would leave 2021 US production short of expected domestic and export demand, cutting stocks and leaving a bullish outlook. US quarterly corn stocks estimates were also bullish, seen at 7.701 billion bushels, which is below average trade guesses and down 3% on the year. 

Hosted on Acast. See acast.com/privacy for more information.

World wheat markets have fallen again this week and have now effectively lost all the price gains they made in 2021. London wheat futures fell to their lowest level since the 17th December. In January, fears that Russia would close the door on wheat exports saw Black Sea export prices soar to £300/t free on board (FOB), before including freight costs. Buyers are now harder to find and traders’ offers were reported to have fallen to $250/t searching for demand. Prices have fallen sharply despite strong exports to date for the world’s major producers. Weekly wheat export sales for the US were 344,000 tonnes, taking the season’s total sold to almost 93% of the surplus estimated by the United States Department of Agriculture (USDA), which is just ahead of average at this time of year.

From this point, sales only need to average 80,000 tonnes per week to hit the estimate. US weekly corn sales included the 3.8 million tonnes that China bought last week, bringing the total sold to just over 4.6 million tonnes. Over 98% of the USDA’s estimated surplus is sold, which is 25 points on the average at this time. If just 1% of last week’s sales are made each week to the end of the season, the USDA target will be exceeded. 

Hosted on Acast. See acast.com/privacy for more information.