The USDA report did little to excite the trade last week as its increase in US wheat stocks was mostly expected. This encouraged funds to continue selling, pushing futures down to new contract lows, before ‘turnaround Tuesday’. The 20 plus cents per bushel rise in the market seems to be due to market shorts banking profits, as nothing fundamentally has altered regarding US wheat and exports remain behind the revised forecast.
EU prices followed the US lower to trade within a euro of the yearly low for new crop set last March. However, unlike the US, the following rebound has some substance behind it. Weekly exports, or more to the point, revised weekly exports, have increased over the past few weeks leaving the seasonal total now just 11% lower y/y, compared with 26% at the end of January. Recent North African wheat tenders will most likely be of French origin and, with a decent shipping line-up over the past couple of weeks, France’s farm ministry increased its projection for French exports beyond the EU, cutting ending stocks accordingly.
The UK market also eased to a new yearly low on new crop, taking out the previous level set back in March 2018. However, this was short lived as the market then rebounded on the global turn. However, wild swings in sterling continue to complicate an already unclear old crop market.
In summary, have we seen the bottom, or is the market pausing for breath? The US funds remain short, and it appears that along with some profit taking, a level of weather assurance is being built into prices, as cold wet conditions increase the risk of delay to US spring sowings. EU prices now seem to have found support on the rise of exports and recent trade, that will most likely be of EU origins, while the UK continues to be gripped by Brexit and its currency implications. This leaves a market that is hard to call.