Another quiet week for the US market, with market values $1-2 lower. The latest USDA report did little to excite the trade last week. US wheat stocks were forecast higher, while winter wheat plantings were put at their lowest level ever recorded, but both were within trade expectations. US wheat continues to hang onto the shirt tail of any impending US/China trade deal, buoyed by recent comments by President Trump that he might let the 1 March deadline ‘slide for a little while’. He added that he would prefer not to and expects to meet with the Chinese President to close the deal at some point.
Likewise, European wheat has shown little price action, trading about €1.50/t down on the week. Wheat exports to non-EU destinations have picked up slightly, mainly on weekly revisions supplied by Brussels, but are still seen down 22% y/y at 10.1mln t. Russia’s agriculture ministry confirmed there was no need for export restrictions at a routine meeting with exporters, with total yearly exports still projected at 42mln t. However, with the forecast showing exports of circa 37mln t to the end of February, the rise in domestic prices seems to have already done the job, as Russian wheat is no longer competitive on global export markets. Ukraine’s wheat exports have reached 12mln t, 75% of the agreed volume, leading to its grain association again asking exporters to submit data on shipping plans for the rest of the season.
UK prices are marginally higher on the week, although Brexit continues to dominate. Talk of a possible extension to the 29 March deadline has surfaced, although Theresa May says she is still committed to delivering Brexit on time, ahead of further talks on the Irish backstop. Official data released this week showed domestic wheat usage slowing in Q2 (Oct-Dec 2018) as maize usage increased. Wheat imports were reported at 1.17mln t to the end of December. That suggests further reductions in domestic usage, or increased imports, may be required if the lower-than-expected wheat area reported in last week’s Defra BPS data is correct.
In summary, another week of political spiel and little reaction in prices. The US/China trade talks, EU/Black Sea export demand/availability and Brexit will continue to dominate. However, with new crop prospects remaining positive for a sharp rebound in Russian and EU wheat production, the likelihood for any sustained price rally would need a major weather problem. However, talk of colder weather entering the US southern plains, where there is no snow cover, may increase the threat of winterkill.