While the soybean and corn markets are caught up in trade war politics, the wheat market seems to have found some support. Talk of further reductions in the Australian crop, and possibly Canada, due to early frost and freeze damage has supported the Chicago market. Funds are now reported to be square, after liquidating their long position over recent weeks. Gradually the global export availability is tightening and, with the expectation of some sort of control being placed on Russian exports, we may have witnessed the low of the US market.
European prices in general have followed the US market. Egypt purchased a volume of wheat for November, with Russia again the major origin, and Saudi Arabia bought wheat thought be mainly sourced from long holders of German and Baltic wheat. French wheat, thought to be in line to grab a share of the Saudi tender, looks to have lost out on quality, leaving the French to take care of Algeria. Although Russian prices have started to rise after several weeks of decline, they are still by far the cheapest origin, and continue to be aggressively offered.
UK prices have weakened over the week prior to yesterday’s bounce. Official data showed July wheat imports rising and exports limited to the odd Irish vessel. With this trend likely to continue through the early months of the season, end users seem very relaxed over extending coverage. With the closure of the Hull ethanol plant and the likelihood of increased maize usage in feed diets, the current supply of wheat seems more than plentiful, adding to the negative sentiment overhanging the UK grain market.
In summary, it looks in the short-term that the US market may have bottomed, although a near-record maize crop will keep rallies in check. Long term, the likelihood of further global crop reductions and possible Black Sea government export intervention may support the US markets. However, both the EU and UK market are trading a more domestic supply and demand balance sheet and may only be partially influenced by any rise in the US market. The market is still a complex picture and, when adding in weather, geopolitics and the uncertainty over Brexit, it remains a difficult market to call.