United States wheat futures had been gradually edging higher in recent weeks on growing optimism of improved export demand in the coming months as Russia’s supplies become increasingly scarce.
Wheat futures suffered its biggest daily losses mid last week as Washington played down the prospects of an imminent end to the long-running trade war with China. There was no specific bearish wheat news to trigger the aggressive sell off in futures, but it highlights that investors are very sensitive to the breakdown in trade relationships between the world’s two largest economies. The USDA released its highly anticipated February world supply and demand reports late last week. It was the USDA’s first report since December because of the shutdown of non-essential government services for nearly two months, but it failed to offer any surprises.
The USDA forecast that United States winter wheat plantings would be the smallest in 110 years, after excessive rain limited plantings in several key states. Globally, the USDA raised its estimate for Russia’s 2018/19 wheat harvest to 71.6 million tonnes from 70 million tonnes previously. Russia’s wheat exports were increased by 500,000 tonnes to 37 million tonnes. Australia’s wheat crop was unchanged at 17 million tonnes, but exports were lowered by 500,000 tonnes to 10 million tonnes. This would be Australia’s smallest exports since the drought of 2007/08, if realised.
Global buyers are already looking ahead to the Northern Hemisphere winter wheat crop where harvest will start in about four months. Winter wheat crops across the Black Sea and Europe are enjoying favourable weather conditions which has analysts tipping significantly larger crops following widespread droughts last year. Preliminary estimates have Russia’s wheat crop at 8-10 million tonnes up on 2018/19 while the European Union is expected to be around 15million tonnes higher plantings and a return to average yields. Local grain prices were under pressure last week and finished the week sharply lower. Feed grain bids into the Darling Downs tumbled by $12 to $15 a tonne. Stockfeed wheat ended the week down $14 at $426 delivered. While sorghum fell by $13 to $344 delivered and feed barley was down $12 to $383. Similar declines were seen in New South Wales and Victoria, with smaller declines in South Australia and Western Australia. Australia’s wheat exports picked up in December as crops in Western Australia started to be shipped. Australia exported 721,000 tonnes of wheat in December up from 308,000 in November.