CBOT wheat futures traded up to the top of their trading range on the first trading day in December before falling back to mid range.
Just a week later, things also traded back to the top of the recent trading range, with the difference being that the market settled there.
That meant the end of last week produced the highest closing price for nearby futures since August 31, with some expectations that further upside will emerge.
Strong weekly US export sales drove the rally. On top of that, a new export sale for over 240,000t was reported last Friday. This was very positive, and while the resulting lift in futures prices was further fuelled by speculators hitting buy orders to exit previously sold positions, there is some speculation that we are on the cusp of a new trading range ahead of the new calendar year.
Last week’s international market got a setback, when the tender released by Egypt soaked up wheat from the Black Sea again, with no wheat being offered by the US or EU.
The price for Russian wheat was also seen as being a bit weak compared to expectations. The Egyptian market is in turmoil though, because an inability to pay for wheat cargoes already on the books has seen shipments delayed, and probably was the main reason why EU and US-based traders stood aside from last week’s tender.
At the same time, the market was a little surprised grain that was sold did not have a price premium attached to it because of the payment risks.
Meanwhile, Russia won’t be running out of wheat any time soon. There does seem to be an issue with quality though, and this may account for strong sales of US Hard Red Winter wheat.
We enter the Christmas-New Year period with potential upside on US wheat futures. That will be important for the Australian market, because the strong cash market will eventually need support from offshore. At the end of October, Australia’s wheat market came off sharply when US futures also fell sharply. Prices settled into a gradual downward price trend, bottoming out in November, also when US futures formed another low.
Since then, Australia’s cash market has entered a modest upward price trend that has taken prices back to late October levels in South Australia and Western Australia, which have to supply the east coast shortfall.
The Australian harvest will begin to wrap up, while the December USDA Report will throw more light on supplies as well as provide an assessment of US export projections. We should enter 2019 with a solid base for wheat prices until the 2019 northern hemisphere season settles down.
