World Grain - March 2018 - 22

GRAINMARKET REVIEW
Monthly wheat prices

Wheat

$250

Weather concerns in United
States and Europe have created
nervousness in well-supplied market

$150

by Chris Lyddon

$100
$50

Jan 2018

Dec 2017

Nov 2017

Oct 2017

Sep 2017

Aug 2017

$200

Jul 2017

Weather concerns, particularly in the United States, but also in
Europe have created nervousness in a wheat market that continues
to look well supplied.
The International Grains Council (IGC) noted in its most recent
Grain Market Report that export prices initially had weakened "on
large nearby supplies and strong competition for export business,
with movements in currencies affecting the relative competitiveness
of major origins," since its previous report at the end of November.
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about poor weather for winter wheat in the U.S.," the IGC said.
"However, higher-than-anticipated U.S. plantings and generally
heavy nearby export availabilities around the world saw renewed
price pressure from mid-January."
The IGC GOI wheat sub-Index had softened by 1% since the November report.
"Although futures in the U.S. sometimes traded at contract lows, short
covering was occasionally triggered by poor weather for 2018-19 winter
wheat, with concerns accentuated by ideas of historically low seeded
area," the IGC said. "Sluggish export demand and higher-than-anticipated plantings data put fresh pressure on markets in mid-January."
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$5 to $225 fob (Gulf), while SRW declined by $6 to $181 fob (Gulf).
DNS quotations were $8 lower at $276 fob (PNW).
"In spite of unfavorable currency movements, milling wheat fob
prices in the Black Sea region showed little overall change, at $193,"
the IGC said. "Competitive prices, at about $178 fob (Up River),
helped Argentina sell to North African and Asian markets, displacing
some demand for E.U. and Australian supplies."
The IGC reported poor export sentiment weighing on the market in
the E.U. (France), "but a stronger currency pushed U.S. dollar-denominated export prices $2 higher to $194 fob (Rouen)." Prices in Australia
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price gains restricted by competition from Black Sea wheat in Asia.
Australian Premium White rose by $3 to $225 fob in South Australia.
In its Agricommodities Market Report in January, Rabobank forecast "marginal price strength expected across global wheat futures
in the short term, albeit from near contract low levels." The bank
also forecast "bullish price action on CBOT, to $470 per tonne by
Q2 2018 and for MATIF prices to reach €173 per tonne by Q4 2018.
Export pressure has persisted throughout the northern hemisphere
winter, with an exceptional Russian export program."
Export pressure has continued through the northern hemisphere
winter, with an exceptional Russian export program, the report said.
It continues to weigh on the market.
"U.S. and E.U. export pace has really suffered, down 7% and 19%,
respectively year on year, with prices offered up to $15 per tonne
above equivalent origins," Rabobank said. "That said, the winter period has also brought production concerns."

(in U.S. dollars per tonne)

Wheat (U.S.), No. 1, hard red winter, ordinary protein, export price delivered at the U.S. Gulf port.
Source: U.S. Department of Agriculture; World Bank

Rabobank reported that the "U.S. southern plains drought continues without relief, with areas ranging from moderate to extreme
drought," citing the U.S. National Oceanic and Atmospheric Administration. "This will become particularly relevant as spring approaches and crop water requirements increase considerably."
La Niña conditions suggest dryness persisting until the second
quarter of 2018, "a factor that threatens yield development." The
prospect of freezing temperatures across the United States and the
southern Black Sea region raised the likelihood of winterkill.
"The full impact will only be assessed in the spring, but some risk
of higher abandonment is present," Rabobank said.
It described the weather across Europe and Southern Russia as "largely non-threatening" with positive production prospects. Despite freezing
temperatures across Ukraine, local sources regard regional crop conditions as good. Some support was provided to U.S. wheat by a 3% year
to date fall in the U.S. dollar index, while ruble strength, helped by Brent
crude, had brought Russian offers up by $5 in the year to date.
David Woodland, trader at Gleadell Agriculture, a U.K. business
jointly owned by ADM and French cooperative InVivo, noted U.S.
market nerves about the effect of weather.
"There seems to be plenty of moisture in the Delta and across in
the East but very little respite from the dry conditions that are gradually expanding across parts of the southern plains and central plains
of the United States," he told World Grain. At the time he spoke, late
February, there was more cold weather forecast in the United States
as well as parts of Europe.
European wheat is stable, with limited export demand. As well as
the Black Sea, Europe faces competition from Argentina in its traditional export markets. Russian prices had edged higher, helped by an
oil-driven rise in the ruble and a lack of farmer selling, but the Black
Sea remained the benchmark for international markets. He felt that
potential Russian wheat exports are underestimated. The E.U., at the
same time, faces ending the year with a big carry out.
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: chris.lyddon@ntlworld.com.
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March 2018 / World Grain / www.World-Grain.com

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World Grain - March 2018

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