Chicago Board of Trade (CBOT) wheat futures had another good week last week, with nearby futures trading - and closing - above US600 cents per bushel for the first time since late June and early July 2015.
This was a close of above $300 per tonne for the first time since late April this year.
Without the benefit of the very low exchange rates experienced during the March and April COVID-19 price spike, it is the strength in underlying global wheat prices that is now delivering us futures prices above $300/t.
Outside of the spike earlier this year, we go back to 2012 to see nearby wheat futures above $300/t.
The catalyst for the ongoing strength in wheat prices has been the dry conditions in Ukraine and Russia for their new season winter wheat planting. Acreage has already been lost in Ukraine, with reports suggesting very little wheat has been planted.
In Russia, about 50 per cent of the crop is in the ground. But current expectations are that acreages will fall by 10 to 15 per cent. As well, much of the crop that has been planted has been sown into dry soils, and germination is a problem.
That is all about the 2021 crop, though.
At the same time, we are also dealing with the 2020 Russian crop - which just keeps getting bigger, as spring wheat yields hit record levels in some places.
The US Department of Agriculture (USDA) has added five million tonnes to its estimate - which is catching up with forecasts from Russian analysts - to put the 2020 Russian wheat crop at 83 million tonnes.
This would be the country's second biggest on record.
Until now, Russian farmers have been slow sellers, which has supported gains in Russian export prices.
But, with concerns about export quotas being imposed - and after recent price gains - farmers are reported to have lifted their sales.
Global wheat stock estimates rose by 2.08 million tonnes, as the lift for the Russian crop outpaced reductions for the US, Argentina, Canada and Ukraine.
As such, the USDA's latest report was considered to be bearish for wheat futures and, combined with profit taking, we saw the market continue to pull back from last week's highs.
Moving forward, we continue to rely on the outlook for winter wheat planting in Russia, Ukraine (and the US) to hold current prices.
In Australia, prices were up last week but basis levels are weak. Our wheat is competitive globally, and sales are being made. But grower selling is allowing the trade to keep its prices low.
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