After a week of funds extending their short positions, improved winter crop ratings and talk of potentially higher yields coming out of the crop tour, US prices have been dragged down to new contract lows at all three exchanges. Despite the fact US spring wheat plantings continue to lag the five-year average, forecast of higher US and Canadian acres are seen limiting price rallies on the upside. Markets are trying to recoup after this week’s lows were set, although this may be another ‘dead cat bounce’ as global prices continue to erode as export demand slows.
EU prices have followed the US lower, with new crop values also setting fresh contract lows. Russian export prices continue to ease on the favourable crop outlook and a slowdown in export activity. Forecasts for increased EU and Black Sea production in 2019 continue to weigh and push prices lower, with the likelihood that long-holders will continue to aggressively offer into the export markets in order to off-load inventories.
UK old-crop physical prices have eased, with new-crop levels unchanged on the week despite the weaker tone coming from the global market. The old crop/new crop spread in pricing suggests a tight supply scenario, although the balance sheet portrays adequate supplies, with the continuation of new crop French imports trading into the UK for late July seen alleviating any potential supply issues.
In summary, fresh contract lows, but have we seen the bottom yet? New crop prospects remain poised on the weather with drier conditions needed to advance US spring sowings, and wetter conditions required in the EU and Black Sea to enhance crop development and yield potential. Supply fundamentals continue to look bearish and, given the current scenario, we would advocate that any growers with old-crop wheat stocks should look to liquidate their position, taking advantage of the relatively high UK old-crop prices.