CBOT wheat ended steady, other classes ended lower as funds continue to exit recently established long positions – which, recall, were record large on KC and Minneapolis. It was another day void of fresh demand news, but our work continues to suggest downside risk is limited as problems worsen in Canada and Australia (and now frost in Brazil), and as global cash markets are starting to indicate issues in sourcing high protein/high quality wheat.
The graphic at left shows that soil moisture will continue to decline across the Canadian Prairies.
Cash markets in Europe and the US are little changed today, but the Russian market is higher as concerns mount with respect to protein levels at or above 12%. 12.5-pro Russian wheat is offered for Aug delivery at $198/MT (vs. $160/MT on this day a year ago), and still this is cheap compared to other origins. Currencies in Russia, Canada and Australia are up slightly on the week, and we maintain exporters will not be nearly as aggressive this summer/fall compared to last year.
Once long KC fund liquidation runs its course, we expect KC’s premium to CBOT to return. No sales are advised on this break.
