Both the global and local wheat markets continue to languish. While our market is stuck in a gentle downward price cycle in nearly all port zones, CBOT futures are stuck in a sideways pattern after recovering from seasonal lows set in early March.
Last week futures fell $A4.08 a tonne with a combination of a higher $A and a small drop in futures. In $US terms the market has now spent four weeks in a tight trading range between 456 USc/bu and 471 USc/bu.
Nothing seems to be able to fire up the market, with growing season risks still being ignored in both the US and Europe. In the US the issues are the late spring storms that continue to bring cold weather to crops that are advancing towards maturity in the south, and deep snowfalls in the north where spring plantings should be gathering pace. In Europe dryness is building in Spain, France, Italy and Germany.
In the case of the US the market is relaxed because we had delays to planting last year. We then saw spring crops (wheat, corn and soybeans) planted at a rapid pace once conditions improved, to be followed by a warm and drier May that aided a rapid recovery in early crop growth.
In Europe it is still early days for drought to emerge in a serious way despite the fact that some private forecasters have already begun pulling back their crop estimates.
Either way, the market seems to continue to assume that wheat stocks are high enough that any reductions in output will be easily covered by stocks and not cause an issue to the global balance sheet.
The markets were also not helped by the April USDA Report. This month's report showed a 5.08 million tonne lift in global stocks compared to March. While this was driven by a revision in stocks being held by Iran, it was also included a 1.94mt drop in consumption to account for larger use of corn and coarse grains in the EU.
The year on year drop in global wheat stocks is now down to just 6.28mt. With a recovery in output expected in the Black Sea and Europe, the market assumes that there will be no issue with wheat supplies in 2019/20.
Here in Australia planting is getting under way. There is some nervousness because of the near record dry conditions in southern parts of the country and still poor subsoil moisture levels in the north, but as with the global crop, the assumption continues that this year's output will improve compared to 2018, and relieve the tight supply conditions that have endured in the eastern states for the last two years.
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