US market is about $4/t lower on the week, as beneficial rains in the eastern HRW wheat areas triggered some profit-taking and encouraged new sellers to enter the fray. Although parts of the southern plains remain in drought condition, which is expanding westward, and will keep weather in traders’ minds, the recent price action was a correction from an overbought market condition, both in Chicago and Kansas City. USDA will release its first unofficial estimate of the planted area today, with the trade expecting an area similar to last year’s record low.
EU prices are up €1.50/t on the week, supported by recent tender activity and rising prices. Russian wheat values rose sharply last week, supported by strong export demand and farmer retention, due to the strength of the rouble. The Black Sea is expecting a severe plunge in temperatures over the next 7-10 days and, with the EU also expected to experience a return to winter over the next few days, concerns are mounting that emerging crops may be at risk of damage in areas where snow cover is non-existent. European markets have consolidated on recent tender results and reports of another Algeria purchase yesterday, which on paper seems close to replacement, will keep cash markets underpinned. French farm office reported new crop wheat sowings 84% in good/excellent condition, lower than the 93% reported a year ago.
LIFFE is trading slightly lower on the week, with currency also slightly weaker. Market dynamics remain tedious, with physical prices in most of the country hardly moving. However, milling premiums are edging lower as supplies come to market and mills fill up in the nearby months.
In summary, the US has seen some rain and the market reacted accordingly, but weather concerns in the US, South America, and now the EU and Black Sea, are far from over. Fund managers remain short of Chicago wheat, although this week’s price action seems to reflect they are still happy to hold a short position, but they have almost squared out their short corn position, and now hold a long soy position. The USDA will release the first meaningful US acreage numbers today, but with all-wheat area expected to show little change, the focus will be on the corn and soy numbers. Once released and digested, the market will return to trading weather again!