The wheat market traded within a tight range from a daily close low of 423.5 US¢/bu to a high close of 427.75 US¢/bu last week.
One of the major drivers was currency, with a lift in the American dollar stalling any gains. At the same time, the market is loathe to continue trading lower, with support from a large net short (sold) position being held by the funds.
Wheat is getting its lead from the US corn market. Wheat has to remain competitive with corn for excess stocks to be able to make their way into feed rations.
Corn may get some upside from wet weather which, if it persists over too much of the corn belt, may see acres move out of corn and into soybeans.
Any reduction in US corn acreage is likely to be positive for prices in the short run, allowing wheat to also gain ground. If wheat futures begin to rally, funds may buy back some of their sold positions to preserve profits. That is where a lift in wheat futures is most likely to come from in the short term.
Australia’s old season wheat prices are not likely to respond to a lift in US futures. Big stocks hanging over our market, and shipping logistics constraints seem to be putting a cap on prices.
However, a lift in US futures may flow over into new season forward prices (and certainly into swaps).
The futures market will be watching US crop condition reports over the next few weeks to get confirmation that recent good rainfall events have allowed crop conditions to improve.
That outcome won’t help wheat prices, but if there are any surprises and the forecast also turns dry, it may be enough to trigger a minor rally.
The market will also be digesting this week’s USDA report, looking for confirmation of ending stock estimates based on last week’s USDA quarterly stocks report. There should not be any surprises, unless they adjust export volumes. There is a risk for wheat, because a percentage of the crop has been sold but is still not shipped.
This may result in higher stocks flowing over to the new marketing year.
There’s also a shorter trading week this week with Easter, which may trigger some increased trading activity. Outside of the US there are no significant issues in the very short term.
The French crop has a condition rating of 90 per cent good to excellent.
Overall, there is little to drive the market one way or the other in the short term.
Corn is a key for wheat, and at the moment, it is not rallying despite projections for lower acres.
One issue is the strength in US exports is seen as dropping away in 2017-18, as the South American crop undergoes a resurgence after last year’s poor crop.
