US and EU wheat futures reacted to Monday afternoon’s modest boost in US winter wheat ratings, while the US dollar re-captured much of Monday’s loss. Otherwise, volume remains tired and fresh news is absent, but the US continues very well positioned in the world export market for early summer demand.
US wheat’s discount to European origin is displayed below, and in the case of SRW, which is the world’s cheapest milling origin, albeit of lower quality, the discount is a steep $15/MT to French. ARC’s research also suggests that without above trend yields in Europe & the Black Sea, downside risk in world cash markets is limited. New crop offers in Russia are quoted at $175/MT; seasonal lows should be established at $170-172. Overall, we expect US wheat to remain competitive in a range of $4.20-4.70, basis spot KC futures.
Harvest pressure is still a few weeks away, but weather this year has not been nearly good enough to produce new multi-year lows, and we still have a close eye on potential heat & dryness in the Black Sea this summer. Await rallies to extend cash wheat sales.