Futures hit one-month high

Futures hit one-month high


Grains
MOTHER NATURE: Weather conditions across the globe are impacting current season crops with drought in Australia continuing and cold conditions impacting Canada's harvest.

MOTHER NATURE: Weather conditions across the globe are impacting current season crops with drought in Australia continuing and cold conditions impacting Canada's harvest.

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US wheat futures had a solid week last week, to start this week on a one month high in A$ terms.

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US wheat futures had a solid week last week, to start this week on a one-month high in A$ terms. At this stage the gains are not being driven by this week’s monthly USDA Supply and Demand Reports, but by weather conditions on multiple fronts, and a closer look at the structure of US export sales.

The weather issues include the impact on current season crops, with drought in Australia continuing to worsen, and overly wet and cold conditions delaying the Canadian harvest, with risks of lost production and quality downgrades. In the EU and parts of the Black Sea, it is ongoing dryness that is seen as impacting the establishment of the newly planted winter wheat crop.

That means that there is ongoing uncertainty about the size of the 2018 wheat crop, as well as concerns about the 2019 crop. 

For the latter though it is very early days, and there is little correlation between conditions prior to dormancy versus after, apart from any impact on final planted areas.

What the dry conditions are allowing though is rapid progress in planting, so in the end the area that goes in might end up being close to planned levels. 

At this stage various forecasters are predicting a larger planted area for the global wheat crop for the 2019 harvest.

On the export front for US wheat, volumes are still staying lower than the market would like to see if the US are going to hit export projections this year. 

However, last week did see a better range of countries on the list of buyers, including Algeria, Brazil, Iraq and Saudi Arabia.

This is a good sign as it signals a small, but significant shift, in the potential demand for US wheat.

Here in Australia the big spring dry continued for most of South Australia and Victoria, although Western Australia and NSW picked up significant rainfall in many areas. In terms of the NSW crop it does little except finish off some poor crops in the central west. 

Other wheat areas remained dry with the rain a bit too far to the east, or the west, for most crops.

In Western Australia the rains will have been a big boost for crops in southern growing regions.  However, all it may do is finish off crops rather than adding to yield potential given the losses from the dry September.

The Australian market was relatively stable for the week, indicating that we might be near a top. 

It has also allowed the gap between our prices and export values to begin closing. At some stage we will need to align with global price levels in key export port zones, with a ripple effect around the country.

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