Wheat on big rise

World wheat prices have increased dramatically in the last week. While we are up to our ankles in mud in Georgia, dry weather in Russia’s south and Ukraine, as well as the US Midwest, seems to be depressing wheat yield and/or quality. Implications for Georgia will be high bread prices leading into the elections, and possibly better margins for graingrowers here.

From Queensland Country Life

“ANOTHER run of dry weather in the former Soviet Union’s Black Sea region and America’s mid west has sent skittish global wheat prices leaping in their biggest weekly rise in 18 years.

Chicago Board of Trade prices jumped 17 per cent (about $US1 a bushel) during the past 10 days as expectations of a bumper US winter wheat harvest were undermined by ongoing dry weather, particularly in Kansas.

Drying conditions in some parts of Canada are also on the radar, while forecasts for Russia and nearby States show crops struggling.

On the oilseed front where stocks are already tight industry analysts have also noted also concerns about drying European rapeseed prospects and uncertainty about US soybean forecasts.

But the gloomy and contagious economic environment in Greece and across Europe has also cast a pall over wider agricultural commodity prices with many buyers pulling out of grain markets or delaying orders.

Rabobank has predicted “continuing escalating risk and heightened volatility in agricultural markets” as they cop the knock-on effect of deteriorating financial developments in the unstable Eurozone.

The bank said uncertain macro climate had sent cotton prices to a 22-month low, while oilseed, corn and Arabica coffee prices were noticably undervalued by bearish futures market trends.

Amid increasing volatility, July contract wheat prices in Chicago briefly peaked early this week at $US7.22/bu while December contracts firmed to almost $US7.30/bu.

The rally was fuelled by the US Department of Agriculture (USDA) reporting only 52pc of the US hard red wheat crop was estimated to be in “good or excellent” condition after recent hot, dry weather.

Concern about a return to dry conditions are also rising for Black Sea region crops where drought two years ago sent global prices soaring.

The USDA reported that while winter rain improved the Ukrainian outlook, lately spring had been increasingly dry in southern and eastern Ukraine, which threatened wheat yields even further.

Moisture concerns were also reported in in the Volga, Ural and Siberian regions of Russia.

But despite the danger of a northern hemisphere wheat yield slump, Rabobank’s latest agricultural commodities outlook says a “toxic and extremely contagious macro environment” triggered by European debt was generally having “a bearish impact on markets and skewing prices lower”.

Rabobank said it would be hard for wheat markets to maintain upward momentum, with rallies like the past week’s jump likely to be followed by bouts of strong selling.

Head of food and agribusiness research with Rabobank Luke Chandler said within each agricultural commodity sector there were still fundamental price drivers like the weather, but there was “a big risk of a serious knock-on impact from Europe”.

He noted managed money fund investors were showing limited long term interest in the grain trade.

However, some of the recent wheat rally had been fuelled by traders quitting forward market positions and being forced to buy grain parcels to fill contracts because prices didn’t fall as low as they’d expected before the weather concerns arose.

He said a general stagnation in speculative trading indicated buyers did not want to risk long exposure to agricultural commodities.

Rabobank’s average price forecast for Chicago wheat is tipped to ease from $US6.41c/bu last quarter to $6.40c this quarter and down to $US6.20c and $6.05c during the next six months.

 

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Wheat on big rise – National Rural News – Grains and Cropping – Wheat – Queensland Country Life.