US wheat futures traded in rather narrow range ending unchanged, while EU futures/cash prices finished higher. Managed funds continue to expand their net short position in Chicago, while in KC they have cut their net long position by more than half since mid-July. Interior Russian cash prices have been slow to follow the decline in world wheat futures, and future downside risk in world markets is limited.
Cash prices in S Russia (the country’s export hub) did fall as a record crop increasingly enters the pipeline. Replacement in S Russia this week is pegged at $161/MT, vs. $164-165 throughout the first 3 weeks of August. This is the lowest interior price in Russia since early 2015. However, assuming normal costs & freight, Russian fob offers should find ample support at $178-180/MT, vs. $181/MT today, and the US and Black Sea continue to battle for market share. Note ARC research further suggests that, without abandoning corn and barley export programs, Russian wheat exports will indeed be capped at 29-31 MMTs. Improved Russian infrastructure is needed long term.
A demand-led recovery lies ahead and an increasing focus will be placed on Australian weather during September.
