For wheat, weather issues continue to dominate, providing strong directional movement in markets. US farmers over the past few weeks have been active getting crops sown, and although corn and soybean planting rates are near, or slightly above average, spring wheat continues to lag. In addition, the late sowing of the crop has resulted in slow growth and crop development. US winter wheat crop conditions have shown little change over the past weeks, despite reports of beneficial rains in parts of the HRW wheat areas and, with the outlook now turning to a drier forecast, especially for the Southern Plains, crops could become stressed, leading to further declines in condition, and yield potential, as harvest nears.
European markets have also reacted strongly to the rising global markets, supported by a weaker US$/euro exchange. Dryness concerns persist over parts of the eastern EU/Ukraine and Russia, where a much colder weather system is expected. France confirmed Algeria had purchased 675,000t, likely to be mostly of French origin, but at a $15/t premium to equivalent Russian wheat. The question remains, how long will Algeria continue to ignore Russia? The French farmer, co-ops and trade hope for a long time yet!
UK old crop dynamics remain little changed, with consumption and merchant short demand supporting higher levels. While new crop trades higher on the back of firmer, weather-driven global markets, one thing to watch is sterling, which does have the ability to appreciate significantly if UK economic data or progress in Brexit negotiations are evident. UK farmers have sold some volume into recent price rallies whilst end consumers are largely twitching on the side-lines.
In summary, weather issues in the US, Canada, Australia and the Black Sea region continue to drive markets higher. The weather is set to have a major say in final output in the aforementioned regions, and the focus of the trade currently remains firmly on the supply side of the equation, not demand.