Wheat can’t get a leg up at the moment, with CBOT futures making new contract lows on Friday night last week. The May contract fell to 400 US¢/bu, before the market lifted to end last week just below the previous contract low at 405 US¢/bu.
Various weather issues around the globe are not generating upside. This is largely because the weather in the US is seen as non-threatening for the bulk of the winter wheat belt, and it is too early to be overly concerned about delays to spring plantings because of cool and wet conditions further north in the US and into Canada. There was a frost in Kansas over the weekend, with their season is at the stage of canola being in full flower.
Frosts might be the one factor to put a few nerves into the US market if any persist into wheat flowering. At this stage, the psychological barrier of 400 US¢/bu seems to be about the only factor stopping prices from continuing to drift lower after last week’s steep falls.
Dry conditions in the EU are being watched, but this week’s forecast has rains for many areas apart from France. The UK may also stay a little dry, but in both cases, it is still too early. Further east, recent cold weather in the Black Sea region has not been supportive of US futures. In part because the larger carryout is expected to leave total supply of wheat available to the market little changed on last year. That should leave total exports from that region close to unchanged, even with expected lower Russian production.
A surprise for the market was the planting intentions report from Canada on Friday. Their wheat acreage was pegged at 23.18 million acres, close to that of last year. There is a risk of planting delays to the US and Canadian spring wheat crops, and this may impact yields and final planted acres.
While the US winter wheat crop is looking in good shape, issues with the Canadian and US spring wheat crops will be pushed into the background. Of course, a sharp drop in expected production from Australia this year is also on the horizon, but this won’t really become apparent until the USDA publishes supply numbers.
Even then, it probably won’t be taken too seriously because it is so early in Australia’s season, and will contribute to the already anticipated drop in global wheat production. So, with few issues for the US winter wheat crop, it is hard for US futures to rally significantly.
Australia’s best bet might be support at 400 US¢/bu, which may then just see some buying activity as funds that are carrying very large short positions, balance out their positions. The best hope for a rally is in fact likely to be from fund buying if a trigger emerges that allows futures to move into a short-term upward price trend.
