The US market is down about $3/t as forecasts indicate rain into the southern plains’ extended model. In the southern plains, where the winter wheat crop is emerging from dormancy and requires moisture, at a time when much of the region is gripped by drought, yield prospects are diminishing, raising concerns over greater acreage abandonment and reduced output. In Kansas, the governor has declared a drought emergency order in 28 counties, which allows access of water from lakes, and issued a drought warning for the remainder of the state.
EU Matif prices are up about €2/t on the week, despite a firmer euro and weaker Chicago trade. Support came from Algeria’s surprisingly low 150,000t purchase, which is likely to be of French origin, and no recent reduction in Russia’s export values. The French farm office cut its monthly forecast of French non-EU exports to 8.5mln t, from 9mln t previously. However, due to a sharply higher on-farm feeding figure, ending stocks were reduced to 3.17mln t from 3.25mln t previously.
UK LIFFE is slightly higher, again a reflection of the current market dynamics, and despite a slightly firmer sterling. As we move towards the final quarter of the marketing season, it appears that consumers’ coverage is less than envisaged, mainly because of perceived lower demand, and what on paper, still looks an over-supplied balance sheet. January official data showed year-to-date (July-January) wheat imports just shy of 1mln t, up 3% y/y and more than three times the level of exports, firmly emphasizing the country’s position as a net importer.
In summary, while the balance sheet may tell you one thing, the physical market is telling another. As in the EU report, the wheat may be out there, but may not appear later in this marketing year. Currently, the scale of UK buying exceeds proud cash sellers, although long-holders must be aware that they are sitting on very expensive feed wheat, with cheaper new crop a matter of months away, not only here, but also elsewhere in the world.