Recent precipitation across much of the northern hemisphere has resulted in a greatly improved crop outlook that continues to weigh on global wheat prices.
“The old adage that rain makes grain is carrying some weight in the current market,” said Jonathan Lane, ADM Agriculture’s head of grain trading.
“US markets remain on the defensive, with Chicago wheat trading down a further US$11/t on the week. The 21 December position has now fallen US$43/t from the market high on 7 May,” Lane wrote in his latest report of the wheat market.
“EU and UK prices have continued to follow the weaker global trade, with new crop Paris and London prices down €5.75/t and £5.50/t respectively over the week.”
The rapid pace of spring sowings by US farmers is also adding to price pressure, as it is alleviating some supply fears. “The USDA’s National Agricultural Statistics Service reports corn and spring wheat sowings are 90% and 94% complete respectively, with talk that the strong pace of sowing could push final corn planting 5M acres above USDA’s current projection,” explained Lane.
“That said, the latest US wheat crop ratings are mixed. NASS reported that despite the arrival of much-needed rainfall across the US southern and northern plains, winter wheat crop ratings slipped a further 1% to 47% good/excellent, compared with 54% this time last year.
“NASS also said that its initial rating for US spring wheat came in at a disappointing 45% good/excellent, compared with 80% a year ago.
“However, the US’s Wheat Quality Council’s tour of Kansas continues to report winter wheat yield potential as well above last year, although higher output could result in lower protein content.
“EU prospects have greatly improved over the past week, with crop monitoring unit MARS raising its projection of average soft wheat yields to 5.91 t/ha, up 3.5% on the year and almost 4% above the five-year average.
UK prospects have also rebounded over the past few weeks, with estimates for the 2021 wheat crop back up to around 15 Mt, a figure that would sharply reduce the level of imports required to balance the books for 2021/22.
“Elsewhere, Australian farmers are poised for a second consecutive bumper wheat harvest as they plant grain into near-perfect conditions, while Argentina’s farmers are also getting their wheat crops of to a very favourable start.
“Whilst market sentiment has changed on the generally improved outlook, concern over fundamentals including the Brazilian corn crop, US winter wheat crop ratings and global stocks of all major commodities at historically low levels may yet be supportive, especially if Chinese demand turns out as expected.”
Lane concluded “The 2021 harvest must deliver, and we remain just one major crop failure away from another march higher in prices.”