It is early to spend too much attention to new crop in the Northern Hemisphere, but soil moisture levels continue to be low in many of the major producing regions.
The US Plains, the Volga Region of Russia, much of Ukraine, and Western Canada all have below average levels of soil moisture. Areas of Russia have received just 30-60% of normal precipitation and reports indicate that some winter wheat in Ukraine has not germinated due to dry conditions.
The planted crop in the N. Hemisphere, desperately needs rainfall.In contrast, the issue in China is too much soil moisture.
Persistent rains through Sep. and early Oct. have saturated fields. At 26% completed by Oct. 19, the planting program is well behind the long-term average of 53% by mid-Oct..
There are concerns that late sowing will adversely affect plant growth.In this context, the increased likelihood of consecutive LaNiña weather patterns has raised concerns for global winter crop production over the next twelve months (first of all for wheat), increasing the prospects of continued market volatility.
According to the Australian Bureau of Meteorology’s latest climate update, indeed, the ElNiño –Southern Oscillation (ENSO) outlook remains at La Niña “alert”, meaning the chance of a La Niña event forming in the next few months is around 70%.
Recent cooling in the tropical Pacific Ocean has temperatures approaching La Niña thresholds, and most models suggest further cooling is highly likely.
La Niña-like conditions usually increase the chances of below-average precipitation in East Africa, Central Asia, southern SouthAmerica, southern UnitedStates, northern Mexico, and the eastern regions of East Asia.
Conversely, typically increases the chance of above-average precipitation in parts of Southeast Asia, Australia, Southern Africa, and northern South America.
Thus, global consumers are gorging on wheat, especially of European wheat, at the fastest rate ever.
Wheat harvest is beginning in the Southern Hemisphere, but much of this is already priced into the market, as it will be a long wait until the Northern Winter wheat crops are ready.
Thus, consumers are paying now higher prices and remain under-covered, while supply in the traditional exporting countries remains tight and expensive.
Futures remain in the hands of net buyers as they sell cash and buy short future hedges.
In add, fixed prices for new inputs are hard to find and the very high fertilizer prices are not encouraging new grower sales of cash grain.
In this context, likely wheat prices will remain strong for a time, especially after SaudiArabia bougth more the double of HRW that was searching.
