US wheat futures take a dive before USDA report

What goes up must come down


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US wheat futures finished last week lower ahead of the release of the USDA’s monthly world supply and demand report.

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United States wheat futures finished last week solidly lower ahead of the release of the USDA’s monthly world supply and demand report.

It was the first weekly decline in US wheat futures in a month, and comes on the heels of sharp gains in the previous week. Despite last week’s 2-3 per cent decline in bench market US wheat futures, they are still holding onto the bulk of the 15 per cent plus market rally since mid-January. 

The USDA’s March supply and demand report was slightly bearish wheat futures after they cut its estimate for US wheat exports and raised ending stocks. The USDA lowered US wheat exports by around 700,000 tonnes as they lose ground to Russian wheat into key global markets.

Forecast Russian wheat exports were increased by 1.5 million tonnes to 37.5mt, according to the USDA. The USDA is now forecasting Russia’s 2017/18 wheat exports to eclipse last season’s shipments, which were record large at the time, by a massive 10mt.

Aggressive Russian wheat exports are affecting other major exporters including the EU and Australia. The USDA lowered the EU’s forecast 2017/18 wheat exports by 1mt while leaving Australia unchanged at 16mt.

Australia will struggle to reach the USDA’s forecast wheat exports of 16mt  based on the sluggish shipping pace. Last week ABS reported Australia’s January wheat exports at around 1.2mt, down from the 1.4mt exported in December. Australia has exported 4mt of wheat in the first four months of the 2017/18 marketing year and must average 1.5mt a month for the remaining two thirds of the marketing season if it’s to reach the 16mt forecast.

Queensland remains a spectator in Australia’s grain export program after extremely difficult growing season. Wheat shipments are limited to a small container program and the odd small bulk shipment. Around 80,000t of wheat has been shipped from Queensland from October 2017 to January 2018 which is less than a quarter exported in the same period a year earlier.

Heavy rains lashed large areas of Queensland last week but the heaviest of the rain missed the state’s major grain production regions.  Rainfall totals across Central Queensland ranged from 5mm to 25mm. Patchy rain was recorded across the Darling Downs and Maranoa ranging from 10mm to 40mm. Some of the heaviest rain was received in the western cropping areas with Roma registering 80mm for the week.

Soaking rains in the past six weeks across most the state’s major grain producing areas will go a long way towards recharging depleted soil moisture reserves for the winter crop season. Accumulate totals have range from around 125mm to upwards of 250mm in the southern areas in Central Queensland.

Sharp declines in US wheat futures had no influence on Queensland grain prices, which ended the week little changed. Sorghum prices remained firm, with the Brisbane price ending the week $7 higher at $327. Southern Queensland wheat and barley prices were modestly softer with the rain. Stock feed wheat was down $2 at $337 delivered into the Darling Downs while feed barley finished the week $8 lower at $330.

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