“Factors such as deteriorating US spring wheat conditions due to drought have pushed wheat prices higher - nearly 30% up on the Minneapolis exchange since mid-June - and commentators are forecasting a new heatwave will hit the Northern Plains in the US in the coming days.
“It has been pretty dry in France, Spain and the UK as well.
“There is a looming risk for European wheat. In France, the harvest is progressing, but precipitation in that market over the weekend leaves buyers concerned over quality there.
“We have seen EU wheat prices jump 8 to 9% since early June.
“In Australia, where planting is completed, it has also been fairly dry, so there was quite a bad start for the wheat crop there,” Benjamin Bodart, director CRM AgriCommodities, told us.
In a recent report, farming agency FranceAgriMer said the soft wheat harvest is likely to reach the 36.2m tons mark, which is slightly less than anticipated, even if up 30% on last year’s crop, said the grain market expert.
“Egypt and Algeria have been tendering week after week for wheat and the Black Sea origin is still at the top of the GASC’s list even if prices are now above the psychological $200/T mark, and while there is still plenty of wheat around from the previous campaign, there are signals the market is tightening. There may be a shortage of high protein wheat in 2017/2018,” he said.
Feed barley supply boost on the cards?
There could be more feed barley around due to risks surrounding the malting barley varieties, he said. “In France, the nitrogen content is very high after the prolonged dry and hot weather in June which makes it difficult to use for malting. The recent showers could also damage the quality of both the wheat and barley in Germany.”
In terms of protein, the US weather market is developing for soybeans, with July/August most critical for soybean yields, he continued. “US soybean prices have jumped 13% in the past month due to deteriorating conditions but also due to the recent USDA report showing US stocks are a bit tighter than expected and it predicting a lower acreage than the market anticipated.
“Prices of EU soybean meal and rapeseed have rallied accordingly.”
The next three to four weeks are crucial for corn. More precipitation is needed in the US Corn Belt ahead of the pollination, he said.
The analyst said the market expects a decent amount of corn and soybean exports from Brazil but heavy rain in Argentina has hit wheat sowing there.
The country's farm ministry recently lowered by 100,000 hectares to 5.90m hectares its forecast for Argentina’s wheat sowings for the 2017-18 harvest, started late this year, noting planting had been marred in some areas by wet weather.
President Macri’s tax reforms, ushered more than 18 months ago, eroded the appeal for Argentina’s farmers to stick with soybeans. Record corn exports are now expected after the planted areas of corn increased substantially due to the government lifting export taxes for both that grain and wheat.