Wheat prices chop, finish strong
Wheat markets were mixed for the week after the sharp sell-off from bearish crop reports last week. Prices chopped around at the lows of this move before seeing a nice reversal up to finish the week. It was interesting to note this week that when prices weakened, basis and bull spreads improved, both signs of weakening downward momentum.
World cash trade has increased for wheat and corn. The sharp drop in spot price, a weaker dollar and the underlying concern about production losses in Argentina have all contributed to stepped up world demand, and the US is picking up a larger share of the business.
There were suggestions this week that US soft red winter wheat was the cheapest in the world. US wheat and corn export sales from last week were also better than expected, and next week is likely to be strong as well, which will reflect this week’s robust pace.
The Black Sea continues to see sales slip away as cold weather and logistical issues are making their grain exports less competitive. Egypt bought some cargoes of US corn this week, after having been a steady buyer of Ukraine corn the last few months. Russian wheat prices were higher again this week, up another $10-15/ton. The Russian government announced that it had stopped intervention purchases and there were reports of a government-government deal between Russia and Iran for 2 MMT of wheat.
There were also rumors of possible export contract cancellations by Russia because of logistical problems. Those went unconfirmed, but if any more chatter like that surfaces, the market will certainly take note.
For the first half of this crop year, Black Sea origin all-grain exports stand at a record 30.7 MMT. For the second half of the year, they project that exports will total 28.5 MMT.
Southern Hemisphere wheat harvest has wrapped up, with Western Australia reporting a record 14.7 MMT, just squeaking by last year’s record of 14.6 MMT. Total Australian production is estimated by USDA to be a record 28.3 MMT, also just above last year’s record of 27.9 MMT. And like last year, most of Australia’s wheat will grade feed quality due to another wet harvest.
Argentina increased their wheat production estimate by 1.4 MMT to 13.4 MMT. USDA is projecting them to produce 14.5 MMT, which is still down from the 16.1 MMT last year.