Higher than expected weekly export sales, USDA’s reduced global ending stocks forecast and news that Russia is considering a wheat export tax (see below) supported all wheat futures prices week-over-week.
So, Friday’s session was marked by a marked increase in wheat prices on both sides of the Atlantic.
Infact, CBOT March Soft Red Winter (SRW) futures gained 39 cents to end at $6.14/bu.
KCBT March Hard Red Winter (HRW) futures added 38 cents to close at $5.18/bu.
MGE March Hard Red Spring (HRS) futures jumped 19 cents to end at $5.70/bu.
CBOT March corn futures gained 3 cents to close at $4.23/bu.
A reduction in 2020 U.S. corn production and projected lower corn ending stocks resulted in higher corn prices.
The higher corn prices may have supported higher wheat prices.
Relatively strong Chinese demand for U.S. corn also supported higher corn prices.
CBOT March soybean futures added 1 cent to end at $11.66/bu.
Of course, one reason for higher soybean prices is strong Chinese demand but, not only.
Just a note, since early August, wheat prices have increased $1.54 and corn $1.19.
The November USA Agricultural report, infact, projected that 2020/21 wheat marketing year (June 2020 through May 2021) world wheat production will be a record 28.4 billion bushels.
The world’s five-year average production is 27.6 billion bullion bushels.
And, with excess world wheat supplies, well below average prices could be expected as was the case in July and August with below $4 wheat prices in early August.
But, in its December World Agricultural Supply and Demand Estimates report, US Agency increased its total 2020/21 U.S. wheat exports forecast from 26.5 million metric tons (MMT) to 26.8 MMT, 2% greater than last year, reducing U.S. ending stocks to 23,5 MMT, if realized.
Between November and December, infact, USDA reduced its HRW exports forecast by 2% to 10.8 MMT and increased its White Wheat exports forecast by 10% to 5.85 MMT.
So, the wheat price increase was caused by strong demand for flour milling bread wheat and declining Hard Red Wheat stocks.
While world wheat ending stocks are projected to increase to a record 11.8 billion bushels, world Hard Wheat ending stocks are projected to be 1.562 billion bushels compared to a 10-year average of 1.661 billion bushels.
United States hard red winter wheat ending stocks are projected to be 338 million bushels compared to a 10-year average of 422 million.
US Agency forecasts total global wheat consumption in 2020/21 will jump to a record 758 MMT, 1% more than last year and 4% more th an the 5-year average on higher feed and residual use in China, Australia and the European Union.
December’s world wheat ending stocks estimate fell commensurately to 316 MMT, still 5% more than last year and 14% more than the 5 -year average on significantly larger harvests in Canada, Russia and Australia.
This week’s commercial sales of 616,000 metric tons (MT) for delivery in 2020/21 were up 38% from last week’s 446,000 MT and well above trade expectations of 200,000 MT to 550,000 MT.
Year-to-date U.S. commercial sales now total 19.1 million metric tons (MMT), 13% ahead of last year’s pace.
The Great Lakes – St. Lawrence Seaway System will be closed from early January to mid-March 2021.
Between November and December, US Agency increased its 2020/21 Australian wheat production estimate by 1.50 MMT to 30.0 MMT, which would nearly double last year’s output, if realized.
However, Australia’s Bureau of Agriculture and Resource Economics, currently forecasts the country will produce 31.2 MMT this year.
According to Reuters, the Russian government is considering imposing a grain export quota and wheat export tax for February t o June 2021 deliveries following President Vladimir Putin’s public criticism of rising domestic food prices.
“We must take concrete measures to effectively stabilize the prices of products that are important for people – in line with the instructions of the head of state,” said Prime Minister Mikhail Mishustin on Dec. 10.
On Dec. 11, a Russian agriculture consultancy, reduced the country’s 2021 wheat production forecast by 5% to 76.8 MM T on overly dry conditions during planting and early germination.
“Wheat entered this winter in the worst shape since 2009/10,” the Agency said, adding that about 3.20 million hectares (7.90 million acres) could be lost after this winter compared with 1.8 million hectares (4.45 million acres) lost a year ago.
Another element of prices support, the harvests are now more than half over in Argentina and the yields remain very disappointing.
Plantings of corn and soybeans have accelerated, but growing conditions are worrying.
The Buenos Aire Stock Exchange notably cut its estimate of “good to excellent” corn by 10 points, to only 24%, against 43% last year!
Argentinian soybeans only obtained the “good to excellent” label at 55%, against 67% a year earlier, keeping soybean prices high.
Another reason of higer soybean prices, is that Brazil is essentially out of exportable soybeans. (A Brazilian company imported a cargo of U.S. soybeans.).
Around the first of the year, Brazil’s soybean prices are projected to be lower than U.S. soybean prices, but, the worsening of weather conditions changed the scenario.
Brazil’s export soybean price is reported to be $1.13 cents per bushel ($41.10/MT) higher than the U.S. soybean export price.
Hence, Chinese demand is also one of the reasons for higher grain and oilseed prices, but not the only reason.
Just to give an example, this is China’s increasing demand for corn.
The Baltic Dry Index (BDI), an assessment of the average cost to ship raw materials like grains, coal and iron increased 1% on the week to end at 1,211.
The U.S. Dollar Index increased from last week’s 90.47 to close at 90.95.
