The weather forecasts in the northern parts of the United States and up into the Canadian prairies tend to favour hotter and drier conditions, but then rains seem to arrive in enough areas to ease concerns. Some of the rain events have been storms, and there are always places that have missed out, but the rains that have arrived have tended to take tension out of the market.
For much of last week July Chicago Board of Trade wheat futures traded in a range of 670 to 700 US centa a bushel, with daily closing prices in the range of 680 to 688. In $A terms this was a tight range from a low of $324.05 a tonne, to a daily closing high of $325.32.
Of course, it is the December CBOT contract that is driving our new season price levels, and its daily closing price range last week was $328.93/t to $332.08/t. In the Australian market this drove forward prices around $315/t delivered port ($330/t in WA).
We have been in a weather market, but the chances of this manifesting itself to be able to move above the May high are not looking that strong. That increases the chances that we have already seen the high for wheat prices for this year, until at least late in the year anyway.
However, it is never that straightforward. Weather conditions can change significantly at any time, and we get political shocks periodically as well. At the end of last week, we got one such left field shock to grain markets, when the US indicated that it may ease mandates on biofuel blends, mainly to support the economics of the traditional oil refiners.
This was a shock because the Biden administration is seen as being quite green. There was an immediate impact on soy oil prices, which pulled canola pries sharply lower, and on corn, with a modest flow over to wheat prices.
We also had the June United States Department of Agriculture Report released last week. US projections show a small decline in ending stocks despite slightly higher supplies expected. Increased domestic use was the main driver for the change to stocks.
Globally the 2021/22 crop was increased as well, with world production tipped to be a record 749.4 million tonnes. Recent rains have added 3.5mt to EU crop estimates, and Russian crop output was increased to a record 86mt as well.
World ending stocks were increased by 1.8mt from May estimates and will rise 3.32mt year on year. When we exclude China from the data, world stocks are set to grow by 6.32mt, with big increases in stocks for Russia and the EU.
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