“World wheat export values recouped some of the previous month’s declines, with the IGC GOI wheat sub-Index climbing by a net 5% m/m,” the IGC said in its Grain Market Report at the end of September.
“Some price pressure continued to stem from rising expectations for Russia’s harvest, particularly during the first part of September. However, with combining nearly finished in the Northern Hemisphere, less than ideal conditions for crops in Australia and Argentina provided increasing support as the month progressed.”
Temporary disruptions at Gulf ports caused by recent storms pushed basis levels upward and contributed to stronger export quotations at times, the IGC said.
“Advances for spring wheat were initially capped by the near completion of harvesting and signs that Canada’s crop would outperform earlier expectations, but the market had a firmer tone toward the end of the month on a potential cut in the official harvested area figure,” the IGC said. “Price sentiment in the E.U. was weighed by sluggish export demand and ideas that strong competition from the Black Sea region would likely be sustained for much of the trade year. However, markets had a seasonally firmer tone later in the month.”
In Australia, prolonged dryness and concerns about potential frost damage in some areas saw new crop (January) futures rally by about one-fifth, the IGC said.
In its Agri-Commodities Monthly report, Rabobank saw “rays of optimism, against a well-supplied global backdrop,” maintaining what it called a “marginally bullish view.”
It noted support from Black Sea infrastructure constraints and deteriorating Australian yield potential.
“With global stocks remaining at record levels in 2017-18, expectations are for a steady price trend higher,” Rabobank said, although the rise was limited, in the absence of a serious production shock.
Rabobank predicted that reduced Australian exports and a shift by buyers to other origins would provide additional support to the market.
“Northern Hemisphere plantings have begun in earnest, with U.S. winter wheat plantings at 24% — 4% behind last year — while Ukraine and Russian winter crop plantings are reported at 19% and 58% complete, respectively,” Rabobank said. “Lacking soil moisture in the southern areas of Ukraine looks to threaten this planting progress if not relieved.”
In its Wheat Outlook report, the U.S. Department of Agriculture’s Economic Research Service forecast world wheat production in 2017-18 at 751.2 million tonnes, up 6.3 million tonnes from the previous month’s forecast and “less than 3 million tonnes behind last year’s record.”
The 6.3-million-tonne rise all comes from outside the United States, meaning that non-U.S. wheat production is projected 12.5 million tonnes above last year’s record.
“Wheat production forecasts for several countries in the Northern Hemisphere have been revised this month based on harvest reports and official information,” the USDA said. “The largest increases in wheat output this month are for India, European Union (E.U.), Russia, Turkey, Canada and Morocco.”
The USDA has cuts its forecast for Southern Hemisphere wheat production, putting Australia’s crop 1 million tonnes lower on the month, at 21.5 million tonnes.
“Wheat has reached maturity in the northeast, while wheat in the southern and western regions is going through the last stages of the reproductive period,” the USDA said. “Exceptionally dry, warm weather — starting in August and continuing during the critical month of September — reduced wheat prospects in several growing regions of the country.
“The drought was especially severe in the northeastern part of Australia — in the States of New South Wales and Queensland — reducing the projected national average yield. On the other hand, in the State of Western Australia (which produces 35% to 40% of the country’s wheat), timely September rains are expected to benefit the crop, which at that time was still in its filling stage.”
U.S. plantings for harvest 2018 have been unusually slow. Amandeep Kaur Purewal, senior analyst at the U.K.’s AHDB Market Intelligence, reported on AHDB’s website that as of Oct. 15, just 60% of U.S. winter wheat had been sown, “10 percentage points lower year on year and 11 percentage points behind the previous five-year average.”
“Cold and wet weather is reported to be a factor behind the slow planting progress in some areas this year,” she said. “In 2017, the U.S. planted wheat area was the lowest since records going back to 1919. If confirmed, a further drop in the U.S. wheat area could potentially mean that the country’s grip on the global wheat market weakens further. In the meantime, Russia has been increasing its dominance and is set to be the top wheat exporter this year.”