This year, nearby Chicago Board of Trade wheat futures hit a low of around 426 USc/bu in March. The March low can often be the low point for the first six months of the calendar year, but this year we revisited those lows in late April, and then moved to a new low around 419 USc/bu in May.
There is a strong price pattern for CBOT wheat futures to rally from the March low into the middle of the year. That mid-year peak can occur in May through to early July. In 2010 the rally was 380 USc/bu, but the peak was not until August, and it was driven by dry conditions in Russia and concerns about the US corn crop.
In 2013 the rally was only 50 USc/bu, but aside from the extreme moves seen in 2010, and 2012, most years since 2013 have seen prices rally by 130 to 150 USc/bu. The exception was 2016 when prices only lifted by 81 USc/bu.
So far this year the market has moved from the March low of 426 USc/bu, to the intraday high set on May 21 of 493 USc/bu, a modest gain of 67 USc/bu.
On Friday night last week that high was nearly retested, but we did set a new closing price of 489 USc/bu for the current rally which was significantly higher than the previous best close of 479 USc/bu.
If the price rally was to stall now, it would be the weakest rally from the March low since 2013, and the second weakest post March rally since before 2009.
It would seem that this year there is enough happening within the US for further price gains to be supported.
The time frame for further gains is about another four to six weeks. That is when corn and soybean planting in the US will be complete, and when their wheat harvest is well under way so that the impact on production and quality of the current wet weather on the US wheat crop can be assessed.
However, to be assured of a strong price rally it would still be good to get some support from crop conditions elsewhere, like Canada, Europe or Russia.
In $A terms, the rally from the March low has been $A23.60 a tonne. From the May low the market has jumped $A37.60/t in 10 trading sessions.
If this year's rally extends for another 60 USc/bu, we would add $A30/t to the $A value of CBOT futures. Given that basis levels in WA and SA have pulled back to "normal" levels, we would expect to see most of any such rally transfer into our new and old season cash markets.
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