The bargain hunters were back in the US wheat pits overnight. This appeared to trigger a round of short covering resulting in the market rally on the back of technical trade. Soft red wheat futures at Chicago fell 8.9% in April, let’s hope that the upside in last night’s market is not a dead cat bounce and is the start of some serious short covering.
Perspective: In December 1999 hard red wheat futures in the US hit the lowest level they had in the last 25 years, that number was 248.5c/bu. Now just say the CPI was 2.5%, that would in theory be equivalent to 407c/bu today. Currently we have nearby HRW futures at 389c/bu, so as a comparison using a CPI of 2.5% that would make the 1999 value closer to 238c/bu. Wheat is cheap in the USA, probably the cheapest it has been in years compared to the ability to buy. CPI data here > tradingeconomics.com/Australia/inflation-cpi
In an attempt to offset the export issues Canada is having with canola into China the Agriculture minister has raised the maximum federal loan limit for farmers from C$400k to C$1.0m. The interest free portion for canola growers will jump from C$100k to C$500k. Why do governments in the commonwealth think the only way to help a primary producer is to put them further in debt.
Argentina expects to produce 20.4mt of wheat in 2019-20 as a result of better sowing conditions and a lower exchange rate. Like Russia has seen, the lower exchange rate buffers at a local level and in some cases see’s local cash prices rise as world values fall.