World Grain - July 2018 - 22

GRAINMARKET REVIEW

Wheat

World wheat situation
(in 1,000 tonnes)

800,000
700,000
600,000

Dry conditions in Russia,
Europe affecting market

500,000

by Chris Lyddon

200,000

400,000
300,000

100,000

Production

2018-19**

2017-18*

2016-17

Consumption

2015-16

*Projected

2014-15

Ending stocks

2013-14

2012-13

2011-12

0
2010-11

With the Northern Hemisphere crop getting closer to harvest, the
wheat market has been dominated by the effects of weather, particularly concern over dry conditions in Russia and parts of Europe.
The U.K.'s Agriculture and Horticulture Development Board reported a surge in wheat driven by the June 12 USDA World Agricultural Supply and Demand Estimates report.
"It lent a bullish tone to the beginning of the week, which saw new
crop wheat futures soar in the U.S. and Europe," the USDA said in
its Market report.
In its Wheat Outlook report, published June 14, the USDA's Economic Research Service gave the Department's latest forecast for
world wheat production in 2018-19 at 744.7 million tonnes, down 3
million on the forecast made a month earlier and 13.5 million below
the previous record.
"The projected decline in global wheat output this month is less
than the decline in foreign production, given a 0.2-million-tonne increase in U.S. production," the USDA said.
For Russia, the agency noted that "both winter and spring wheat
production are reduced this month. Untimely dry weather persisted
in the western primary winter wheat areas (southwest of the country)
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For the E.U., the USDA said that "this month, wheat yields and
RXWSXWDUHSURMHFWHGORZHUIRU*HUPDQ\DQG3RODQGUHÀHFWLQJSURnounced dryness across the countries."
Movements in world wheat export prices continued to be mainly
linked to prospects for 2018-19 crops, the International Grains Council (IGC) said in its Grain Market report at the end of May.
"Price gains in the early part of the month were eroded as the weather turned more favorable in a number of countries," the IGC noted.
"However, crop worries persisted and prices reacted to changeable
weather conditions as the month progressed, rising strongly again in
the latter part of May. Strength in the dollar had a notable impact on
export competitiveness among the major origins."
The IGC's Grains and Oilseeds Index had risen by 5% over the
previous month, taking average export values to nearly a quarter
above levels at the same stage in the previous season.
"U.S. futures initially rallied to around nine-month highs, but markets
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supplies would be ample," the IGC said. "This was underscored by US'$¶V¿UVWJOREDOVXSSO\DQGGHPDQGRXWORRNIRU1HYHUWKHOHVV
continued domestic and global crop uncertainties saw two-sided day-today movements in futures in the second half of the month."
Since its previous report, U.S. Hard Red Winter export prices rose
by $9, to $254 fob (Gulf), while Soft Red Winter gained $7, to $230
fob (Gulf). The IGC said that new season July SRW was quoted at
around $228 fob (Gulf), up $8 on the month, while Hard Red Winter
gained $9, to $254 fob (Gulf).

**Forecast

Source: U.S. Department of Agriculture

"Prices in the E.U. often responded to direction in the U.S., with Paris
futures climbing to around 10-month highs in the second part of May,"
the IGC said. "A weaker euro was seen to be improving export prospects; despite the advance in local futures, grade 1 dollar-denominated
export values showed little change in France, at $206 fob (Rouen)."
French new crop (July) traded at around $207 fob (Rouen), $6
higher on the month.
The IGC described nearby Russian milling wheat export values as
having edged lower to $211 fob.
"New season (July) prices were underpinned by concerns about
poor crop weather, gaining $3 ... but at around $202 fob, remained
at a discount to spot supplies," the IGC said.
The IGC also reported that "domestic futures in Australia traded
at contract highs on shrinking production ideas as dryness continued
to impede planting," while "improved weather for 2018-19 seeding
pressured new season values."
In its Agri Commodity Markets Research report for May, Rabobank highlighted how global risks had driven wheat prices to
10-month highs, with "threatening weather" across Canada, Australia, the United States and the Black Sea region.
"Despite a backdrop of heavy exportable supplies, this emerging
dryness raises concerns of tightening exportable stocks, by 8-9 million tonnes, in 2018-19," Rabobank said.
Dryness in the Black Sea had unsettled the market, Rabobank said,
noting that half of normal rainfall had fallen in central crop areas in
the eight weeks before its report was produced. It forecast a decline
of 10 million tonnes, to 75 million tonnes, in the Russian wheat crop
compared to the previous year's record.
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maintain hefty stocks and lower prices for another year," Rabobank
said. "However, if dryness persists, Russian stocks will erode more
rapidly, a factor which poses a more bullish price scenario."
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: chris.lyddon@ntlworld.com.
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July 2018 / World Grain / www.World-Grain.com

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World Grain - July 2018

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