The rally in the wheat market stalled at the end of last week, with futures down 6.5 US¢/bu (A$2.50 per tonne).
The decline was reflected in our cash market, with new season APW prices dropping about $3 per tonne across most port zones.
Although US wheat exports have been robust, there’s concern the US is not getting as much of the export business into the Middle East and North Africa as it might have done on some recent tenders.
The lift in US wheat prices in this latest rally just makes it that little bit harder as well, and will serve to keep the price gains in check.
On the weather front, the main news is the dryness across parts of the US winter wheat belt.
A lot of their new crop is being planted into less than ideal conditions.
High temperatures are forecasted this week, and that will add to the need for rain to get crops established before winter sets in.
The area being planted to winter wheat this year in the US is also under pressure, with some forecasts suggesting it could fall to its lowest since 1913.
Spring wheat plantings are likely to increase a little, but not enough to prevent a reduction in the total area being planted.
Unfortunately, the drop in acreage is not likely to be repeated globally, with growers in Europe and the Black sea regions not facing the same price falls as US farmers.
Another issue is how the season might develop. September has been declared the hottest on record globally, despite cold conditions across much of Australia.
Last year’s big Russian crop is being attributed to a mild winter, and exceptional crop development as a result.
If that trend continues, it will be a serious problem for any recovery in wheat prices in late 2017.
As it stands, a shift back to more “normal” production conditions across the globe should see the growth in wheat output stalled. That would help address the oversupply of wheat outside of the US and China.
If that couples with reduced production in the US, it would go a long way to preventing 2017 prices from dipping as low as they have during 2016.
The key to wheat prices will be what happens in the Black Sea region.
Speculation about their crop, as well as the US and EU crops, during our autumn should deliver us the post harvest selling opportunities that growers storing wheat will be looking for.
If there are indeed issues, it will be a driver for stronger midyear prices.
This is what we have seen every other year since 2007 when we have had a seasonal or politically driven interruption to the expected flow of exports from Russia in particular.
