Corn remains the driver for the global wheat market and the past week has been dominated by weather concerns, mainly in Brazil where continued dryness is affecting the country’s second corn crop.
According to ADM Agriculture’s latest market report, crop estimates are rapidly declining and, with no rain expected for Brazil over the coming weeks, the impact of the smaller crop is seen pushing export demand back to US corn.
“This would severely tighten the US balance sheet, especially with continued export demand seen from China, supporting higher corn prices and dragging global wheat values upwards,” said Jonathan Lane, ADM Agriculture’s head of grain trading.
“Although wheat crops in parts of the southern and northern plains of the US have received rains, the forecast of drier conditions has added support, along with the extremely dry and cooler conditions in Canada.
“US wheat prices are completely uncompetitive on the export market, but at present it’s all about corn and Brazil. EU (Baltic) and Black Sea prices remain the cheapest wheat in the world, and at between US$35-US$50/t discount to US wheat there is little reason for them to go lower.”
“EU and UK old prices have remained steady, with UK new crop prices down £2 on the week, despite the Chicago-based rally. Recent rain for crops have been welcomed, although more is needed, along with some sunshine and warmth to enhance yield potential.
“New crop prices remain attractive for growers, in the £180-£190/t price range ex-farm for early in the new crop marketing season, but that does not mean markets cannot retest the recent highs,” concluded Lane.