Another week passes without any fresh news coming out of the US/China trade talks. With the US weather forecast looking more favourable, US prices have reset contract lows. The market is struggling with lacklustre US demand, rising global crop estimates and stable US crop ratings, despite the severe storm that hit the majority of the growing areas recently. Snow and excessive rain will keep spring wheat sowing progress to a minimum, although more beneficial rains are seen for parts of the US plains this week.
European prices have eased on the week, despite EU exports now only being slightly behind last season, and Russian interior prices continuing to rise. The latest Egyptian tender was taken by Ukrainian and Romanian supplies – no French wheat was offered due to the recent quality issue. New crop values remain pressured by the expected strong rebound for 2019 wheat production, confirmed by recent estimates for Germany and Russia, at 24.4 mln t (up 21% y/y) and 83.4mln t (up 17% y/y) respectively.
UK futures have bucked the trend, with both old and new crop values up on the week, with some support seen from a slightly weaker currency. However, cash prices have weakened slightly as the physical and future markets become increasingly divorced from each other, with the May futures position likely to become a more technically driven market. Cheaper EU supplies continue to trade into the UK for the late July/ early August positions. With maize imports likely to continue through until the arrival of the harvest, wheat demand will remain sluggish. Dryness is becoming a concern for the UK with much needed rainfall now projected for the beginning of May – all eyes will be watching the accuracy of this forecast.
In summary, with no US/China news, improving US and EU weather outlooks, and increasing global crop estimates, it remains tough to get bullish. Weather may be a factor but any US short-term sowing delays will be negated by beneficial rains, enhancing already much-improved soil moisture levels for the development of US spring crops. That is hardly evidence in a case for a substantial rally in prices!