Dryness is spreading in parts of Europe and the Black Sea. Against the 10-day forecast at the start of this week, the expectation is that rapeseed and wheat crops in parts of northern and central Europe will start to become stressed.
In the Black Sea region there is little incentive to ramp up selling wheat while it remains dry in southern Russia.
This was enough to stall the decline in Chicago Board of Trade futures seen during most of last week. To end the week, we saw the market post gains on the May contract for the first time in five trading sessions.
While futures were down 22 US cents a bushel for the week, in $A terms the decline was only $A4.33 a tonne, as once again our dollar showed weakness against the US dollar.
The theory is that prices will remain supported against importer buying, and reluctant selling while dry conditions persist across Europe and the Black Sea. That is the theory. In markets that are being blown from one direction to another with the coronavirus impact, nothing should be taken for granted.
In Australia, old season cash prices have continued to rise anyway. Our market did not follow CBOT futures higher a couple of weeks ago, allowing basis levels to weaken. Weak basis levels were not sustainable, and so our market moved higher as competition for grain between exporters and domestic traders ramped up.
We start this week with a strong old season cash market with prices for the 2019/20 crop at their highs, and easily at new highs in WA and SA. Even in NSW prices have now moved $10/t above the previous highs.
It is highly likely that the grain from our last harvest is close to fully committed, either to export orders or needed for domestic consumption.
Prices in the Newcastle zone have lifted by $50/t since March 11 to the end of last week. Prices in SA are up $60/t over the same period, while WA prices are up $62/t.
Over the same period, CBOT futures lifted by $30/t, indicating a $30/t lift in basis in the two major export states, and a $20/t lift in basis in northern NSW.
New season prices have not had the same gains. In fact, new season prices have stuck close to the $A value of CBOT futures, with both rising by about $30/t since March 11. However, it has not been a straight line up, with the market peaking $10 to $15/t above the prices at the end of last week.
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