Wheat futures ended mixed in the US (additional profit taking is noted in Minneapolis), and higher in Europe, and so far seasonal trends seem to be intact. In spite of record production in Russia, the fob market there is up $6/MT from early September, and in each year since 2012 a fairly noticeable recovery has occurred in value in the Sep-Nov quarter. S Hemisphere production is also gaining importance, and weather in Argentina and Australia is far from ideal.
US export sales through the week ending Sep 7th totaled 12 Mil Bu, down 2 Mil from the previous week and slightly below the pace needed to hit the USDA’s target. Note that ARC expects the second half of the crop year to be very different from the first in terms of US export demand, and following the recent break in KC futures, only Russian origin is cheaper than Gulf HRW through November. The EU market is losing its share of world trade.
Still no rain is offered to Australia through the next 10 days. Fortunately excessive heat is absent, but a pattern shift is needed very quickly to salvage yield potential. Vegetation health continues to erode across NSW and Queensland (which account for 35% of total Aussie production), and without rainfall by late Sep, an Aussie crop below 20 MMTs becomes more likely. Too much rain has fallen in Argentina, and the Buenos Aires Grain Exchange is now indicating declining crop conditions and lost acreage there.
Sustained rallies will be rather difficult as there’s just too much wheat in the Black Sea. However, we do maintain that seasonal lows have been scored, and we advise waiting on a test of $4.75+ to advance 17/18 sales, and again we advise using the market’s carry to be active in hedging 18/19 production.
