World Grain - July 2019 - 14

GRAINMARKET REVIEW
Monthly wheat prices
(dollars per ton)

250

WHEAT
U.S. weather woes drive market
by Chris Lyddon

Weather uncertainty in the United States has helped to keep
the wheat market volatile in recent weeks, while production
woes in North America are one of the factors contributing to
the expectation that Russia will remain the dominant wheat
exporter in the coming year.
In its Agri Commodities Monthly Report for May, published May 29, Rabobank said that U.S. rainfall had resulted
in a 20% increase in Chicago wheat prices so far in May, with
MATIF rising by 10%.
"Kansas and Oklahoma received up to 400% of normal precipitation in the last 30 days, and both continue to face a higher
probability of wetter and cooler weather ahead," Rabobank said.
"Winter wheat protein content will likely suffer, and chances of
crop infection from fungi and mycotoxins have increased.
"The amount of U.S. spring plantings that are prevented by
the rainfall is likely going to be very small, compared to corn.
We will likely see continued price volatility. But the market
will soon again shift its attention to production forecasts for
other key producing regions."
Rabobank also noted that Australia faced a "dryness or related subdued harvest," in 2019-20.
"Australia has needed to import wheat this month, for the
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"The Black Sea will soon take center stage in pricing," the
Dutch bank's analysis continued. "With weather worries in the
U.S., along with poor planting and growing conditions in Australia, the wider European region is key to global supplies."
The E.U. raised its 2019-20 soft wheat production estimate
to 143.8 million tonnes, up from 141.3 million tonnes a month
earlier.
"The weather has been a little drier than normal in France
and parts of Germany so far this season," it said. "Production
and export estimates for Russia have also continued to trend
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moisture. We still expect a strong supply out of the region that
could and pressure on CBOT and MATIF wheat."
In its Grain Market Report on May 30, the International
Grains Council (IGC) reported that its index for wheat had
rallied by 4% over the preceding month, "as initial weakness
was outweighed by more recent gains."
"Expectations for plentiful global supplies in 2019-20 conWULEXWHGWRWKHVRIWWRQHLQWKH¿UVWSDUWRI0D\XQGHUVFRUHGE\
14

200
150
100
50
0

Nov 18 Dec 18

Jan 19

Feb 19 Mar 19 Apr 19 May 19

Wheat (U.S.), no. 1, hard red winter, ordinary protein, export price
delivered at the U.S. Gulf port for prompt or 30 days shipment.
Source: U.S. Department of Agriculture and World Bank

the USDA's initial projections for next season, which pointed
to a bigger world harvest and record stocks," the IGC said
"There was added pressure from lackluster export demand, as
well as world trade tensions.
"However, markets turned much more positive later in the
month amid uncertainties about crop prospects in some regions.
Escalating concerns about the impact of overly wet weather for
U.S. crops was the main focus, but there was additional price
support from dryness in Australia and Canada, as well as nervousness about forecasts for a spell of hot weather in Russia."
The USDA's Economic Research Service's Wheat Outlook
report for June, published June 13, said that "global wheat
production in 2019-20 is projected to reach a new record of
780.8 million tonnes, up 3.3 million this month."
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18.9 million tonnes above the 2017-18 record," the ERS said.
"Most of the increase, both monthly and yearly, is in foreign
(world minus the U.S.) wheat production. Two major wheat
grain exporters - Russia and Ukraine - as well as India,
have seen their production prospects increased."
The ERS said 2019-20 wheat exports from Russia are now
forecast at 37 million tonnes, a revision upwards of 1 million, due to expected higher production of winter wheat in the
southern part of the country.
About 500,000 tonnes has been added to Ukraine's export
forecast, bringing it to a record 19.5 million, on increased production expectations. Competition from Russia and Ukraine
means that the U.S. experts now expect the E.U. to export
500,000 tonnes less wheat than earlier forecast, while Australia will suffer from Black Sea competition in its traditional
Southeast Asian export markets.
Chris Lyddon is World Grain's European correspondent.
He may be contacted at: chris.lyddon@ntlworld.com.
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July 2019 / World Grain / www.World-Grain.com

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World Grain - July 2019

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