Frontrunner

Persistent hot and dry weather continues to damage spring wheat crops in the northern US states, particularly North Dakota and Minnesota. Weekly crop condition ratings slipped to 11% rated ‘good to excellent’, which is just one point above the worst condition rating on record in 1988. The area rated ‘poor to very poor’ increased on the week to 63% from 55% and this data propelled US spring wheat futures to new contract highs - their highest level since November 2012. The weather forecast signals little relief for parched crops and similar problems persist in the Canadian prairies. In its July World Agricultural Supply and Demand Estimates (WASDE) report the United States Department of Agriculture (USDA) cut its Canadian wheat crop estimate by just 500,000 tonnes to a new figure of 31.5 million tonnes, which compares to 35.18 million tonnes produced in the previous season. However, some see Canada producing as little as 25 million tonnes, an estimate which tightens global supply of high-quality bread making wheat.

US Chicago Board of Trade (CBOT) wheat futures rallied sharply this week, gaining 10% in value from last week’s three-month lows. Persistent hot and dry weather conditions across US and Canadian spring wheat production areas look set to continue into next week and will prove further damaging for yield potential. Minneapolis spring wheat futures rose above $9/bu which is their highest since December 2012. The fast rise in spring wheat futures prices has significantly extended its premium to CBOT soft red winter (SRW) wheat futures above $2.20. In early April it was little more than 30 cents.Monday’s US spring wheat progress report saw only 16% of the crop as good to excellent. Although this was unchanged on the week, it also saw the poor to very poor rating increase five points to 55%. On Monday, the United States Department of Agriculture (USDA) cut its US spring crop estimate by 41% on last year and cut total 2021 US wheat production by four million tonnes from its June estimate to 47.52 million tonnes, which is two million tonnes below last year.

Wheat markets have stepped lower this week again, strongly influenced by the fortunes for US corn.Chicago Board of Trade (CBOT) markets were closed on Monday for Independence Day but most of last week’s sharp price rally was lost on Tuesday following the long US weekend. CBOT corn opened 40 cents down but losses over the week amounted to 10% as US weather changed to cooler and wetter conditions. This was deemed ideal for developing corn plants as they head towards their pollination period. Speculative funds have been heavy sellers, reducing their long positions and taking corn futures 10% below last Friday’s close through the week. It was not all negative news for corn, with analysts making further cuts to the Brazilian corn crop. Companhia Nacional de Abastecimento (Conab) dropped its estimate by three million tonnes from its previous figure to a new estimate of 93.385 million tonnes. It is anticipated that the United States Department of Agriculture (USDA) will publish a similar number on Monday in its July World Agricultural Supply and Demand Estimate (WASDE) report, down from its previous figure of 98.5 million tonnes.