WHEAT futures ran out of bull fodder over the past three to four weeks with markets off the highs, trading about 50 US cents per bushel or $23 per metric tonne off the peak price of the season.
Ukraine and Russian planting weather problems have alleviated for the time being.
NDVI maps suggest improved establishment in many areas and now the crop is entering into the dormant period, where generally we see little news.
In Europe, the early planting problems created by wet weather have since been solved, with hectares now in the ground.
The dry weather has been good, but we will now need to see rains and snow to keep the crop tracking well.
Again, in winter, we do not expect too much bad news.
In the United States, the market was very worried about dryness in the winter wheatbelt, especially the Southern Plains.
But again, we have seen decent rains in the past month and don't expect too much news over winter.
In the same period, the Argentinian crop has reduced, with a poor finish to a dry season reducing wheat crop estimates to about 17 million tonnes.
On the other side of the equation, we have Chinese, African and Pakistan demand supporting global cash wheat, with Pakistan especially buying significant amounts of wheat that the market wasn't expecting.
However, this cash wheat demand doesn't necessarily translate into futures price moves.
Outside wheat, we note there are weather issues for South American corn and soy production in Argentina and Brazil.
Prompt rain is needed to keep the crop on track, especially in the Matto Grosso, Brazil's largest producing State.
Wheat futures are supported by continuing corn and soy weather issues, but there is risk to US corn futures from COVID-19 shutdowns.
To offset any global weather concerns, we have seen a good finish in Australia and excellent yields in many areas.
Crop estimates are growing larger in Australia, with New South Wales predictions at a 13-15mt record and some analysts pointing at a national wheat crop of more than 33mt.
Locally, despite the continuing price softness due to harvest pressure, we see Western Australian wheat performing well versus the rest of the country, with elevation margins on the East Coast exploding due to this selling pressure (see chart).
WA growers are getting about fair value in the current market but a further sell off in futures, combined with Eastern States continuing (and probably intensifying) harvest pressure, can undermine current values.
This can result in the FOB market becoming pressured by Australian grower selling, despite Australian wheat being very well priced into traditional and inelastic demand.
As everyone is aware, selling in the harvest/grower selling pressure window is best avoided and this year will be no different.
We need to remember that export wheat demand is good, Australian cash is well priced relative to the rest of the world and there is a lot of export business being done.
