International futures appear to be ignoring the current fundamentals, selling wheat futures lower at Chicago, Minneapolis and Paris. The sell down may have squared up the December SRWW contract. The Dec stochastic now neutral. This could be an indicator that the market is in a position to react either way. Will the punters listen to the prediction of a Q3-4 US recession from Elon Musk, will the punter determine why Berkshire Hathway holds more cash than stocks, will the punters learn to read a weather map and start to figure out that EU, Canadian, Australian, Chinese and some parts of the US are very unlikely to meet current wheat production estimates. Or will that just trade whatever is in tomorrow night’s WASDE report.
Whichever way they choose to go there is likely to be some pressure on local prices here today. Local wheat basis to Chicago futures did improve a heap yesterday, and we did see basis counter a lot of the negativity in US futures during mid May. Basis then climbed to roughly +66c/bu FOB. If we can see a similar improvement in basis here today then the move in US futures will be countered.
From a cash perspective US wheat remains very cheap for the Asian consumer, who funnily enough are appearing regularly on the USDA weeks crop sales and exports report. Compared to Aussie wheat on a delivered N.Asia equivalent price, US HRWW remains priced at roughly US$10.00 to US$12.00 better than Aussie wheat. Kind of makes you wonder why US wheat needs to fall in price. Aussie wheat is US$4.00 cheaper than Russian wheat into the same market.
The pressure in futures pushed spring wheat values lower across SE Saskatchewan too. Canadian spring wheat out of the Pacific Northwest shed roughly AUD$6.00 in value overnight, but still remains close to US$30 above Aussie H2 values into Asia. The Canadian forecast is looking a little better now, 15-50mm is expected across Alberta and the lower half of Saskatchewan towards the beginning of next week. The north of France is not so lucky, just 5-10mm is predicted there over the next week. We should expect to see a further decline in French crop rating this week. The dark horse is China. The main winter wheat production area has seen a poor finish with heat and dry preventing grain fill. Now that harvest is about to start there are light showers in their forecast.