International wheat futures finished last week sharply higher as concerns build for wheat crops in both the United States and Europe.
US and European wheat futures rallied by 5-6 per cent last week as traders eye-off dry weather outlooks for the coming weeks.
European wheat futures posted record highs as traders become increasingly concerned about the dry weather outlook which would further restrict already tight global supplies.
World wheat supplies have already been dealt a massive blow as the war in Ukraine restricts exports from one of the major exporting countries. Ukraine's wheat exports have slowed to a trickle since the outbreak of war in February, as Russia blockades shipping through the Black Sea.
Drought across the US Southern Plains and intensifying dry weather patterns across central Europe are set to further deepen world wheat supply concerns as forecasters ratchet back production estimates.
Oklahoma's Wheat Commission said recent rains were too late to help crops in the second largest wheat production state in the US. The commission said Oklahoma's wheat production would be the smallest in eight years and about half the size of last year's crop.
Private forecasters are pulling back US wheat production estimates ahead of the release of the US Department of Agriculture's first cut of the 2022/23 crop estimates this week. Respected crop forecasters are saying the HRW wheat crop will be upwards of 20pc smaller than last year.
Dry weather is also raising concerns of below average yields in Europe. Dry, hot weather in France in the coming 10 days, after several months of little rainfall, is expected to cause irreversible damage to grain crops in the EU's largest grains producer, according to crop institute Arvalis, a European agricultural technical institute.
Unconfirmed reports that India may move to limit wheat exports also offered support for global wheat markets. India's wheat production is set to fall for the first time in five years after a heat wave in March scorched crops. India said it is not moving to curb wheat exports after the reports, but markets remain sensitive to the prospects of smaller exports.
These global wheat supply problems come on top of the likelihood that Ukraine will be restricted to small wheat exports in the next 12 months.
The USDA will release its May World Supply and Demand Estimates report this week, which will include its first detailed assessment of the global 2022/23 forecasts.
Sign up for our newsletter to stay up to date.