Higher prices in the wheat market have continued due to adverse weather and poor crop out-turn.
Crop estimates are tumbling as dryness and heat prevails across most Northern and Southern Hemisphere wheat regions.
“In the US, the winter wheat harvest is in its final stages, while spring wheat is just commencing,” said David Sheppard, managing director of grain trader Gleadell, writing in the firm’s latest market report. “Actual yields of spring wheat will be of interest, following the lower-than-expected findings from the recent crop tour.
“US new crop sales and shipments are still seen running behind on the year, although increased business is expected later in the season.
“EU prices continued to be supported by declining crop prospects as adverse conditions hit production.”
The German Farmers’ Association last week lowered its estimate for the 2018 wheat crop to around 18 Mt. Sweden is the latest to feel the heat wave, and estimates suggest its wheat crop could be 40% down on the year, according to Gleadell. That would turn the nation from exporter to importer.
“Declining crop prospects continue to reduce the surplus in most of the main EU exporters,” continued Sheppard. “Germany is now almost a domestic market and French prices are well above comparable Black Sea supplies. That leads to the question of how long key importers like Algeria refuse to purchase Black Sea origin wheat.
“The UK market has also firmed on the week, following the global trend higher. Rains at the end of last week temporarily stalled harvest in some regions, although the return to drier conditions should increase the pace.
“Regional availability remains mixed. There are good supplies of new crop wheat in the south and east, but limited supplies in the north and west where harvest has only just commenced.”
World weather issues are dictating prices, according to Gleadell, while global production is going backwards, as is the volume of wheat available for export markets.
“This places importers who cannot switch to maize in a perilous position,” the firm stated. “With ample supplies of grains available over the past seasons, buyers have been buying hand-to-mouth. But, in the current climate, this means they are short and wrong.
“They must decide whether to remain in the head-in-sand camp or bite the bullet and buy.
“Long term, the wheat market looks supported, with the trade expecting large volumes of demand to be switched into the US later in the season.
“All the above assumes we get a decent 2018-19 global maize crop which, given the current weather conditions, is not a certainty,” the company concluded.