Wheat futures renew rally, amid fresh worries over EU, US dryness
Spring wheat futures soared to a fresh two-year high, with prices strong in other wheat markets too, after US officials surprised investors by again cutting the condition rating on the country’s spring wheat crop, despite much-needed rains.
Minneapolis-traded hard red spring wheat futures for July delivery soared to $6.57 a bushel in early deals, the highest for a spot contact since late 2014, before easing back to $6.55 ½ a bushel, a gain of 2.5% on the day.
The jump followed a report overnight from the US Department of Agriculture pegging the US spring wheat crop at 41% in “good” or “excellent” condition, a drop of 4 points week on week.
That was, by a distance, the lowest reading for the time of year on data going back to 1995, with the next lowest figure one of about 55%, time adjusted, recorded in 1997.
The proportion of the crop in “poor” or “very poor” condition rose by 7 points to 27% in the overnight report.
‘Storms turned severe’
The USDA downgrade compared with market expectations of a 2-3 point improvement, to 47-48%, in the good or excellent rating after some rain relief in the northern US Plains, the focus for US spring wheat production, and where drought has been spreading.
And deterioration indeed slowed in the crop in South Dakota, which has been worst affected by dryness, with the proportion of springs seen as in good or excellent health holding at 13%, although the proportion rated poor or very poor rose by 7 points week on week to 64%.
“Showers and thunderstorms early in the week brought much needed precipitation to parts of the state,” USDA scouts in South Dakota said, although adding that “localised damage from wind and hail were reported as some storms turned severe”.
‘Irreparable damage’
However, the rains were patchy, with USDA scouts in North Dakota, the top spring wheat growing state, for instance, saying that “the eastern half of the state received one to two inches of rain, which was much needed” while the western half “was still experiencing dry conditions”.
In Montana, “there was no relief for some eastern parts of the state,” and in some areas which did receive moisture “windy conditions negated much of the moisture gained”.
Meanwhile , in Idaho, rain sometimes proved a mixed blessing, with USDA scouts noting that in northern areas “there was still standing water observed in some places” after heavy rainfall.
Furthermore, rain is believed to have come too late for many crops, some of which have, thanks to their poor condition, already been cut for hay or sprayed off for insurance claims.
The USDA rating “should take into consideration the irreparable damage that had been done already in the driest areas”, said Benson Quinn Commodities.
‘Significant deterioration’
The gains fuelled headway in other wheat contracts too, which are also gaining ground on concerns over hot and dry weather in the European Union, the top producer of the grain.
“High temperatures are provoking a significant deterioration of wheat yield potential in west Europe caused by the risk of scalding,” Paris-based Agritel said.
Paris wheat for September gained 1.4% to E180.00 a tonne, the highest for a spot contract in months,
Commerzbank said: “The reason for the price rise is the heatwave that is affecting large parts of the EU.
“This increases the risk of yield losses, which would reduce the amount by which it was hoped that the crop would exceed last year’s disappointing crop,” when ill-timed rains dented output in France, the EU’s top grower, in particular.
One-year high
In Chicago, the world’s bellwether wheat market, soft red winter wheat futures for July rose 1.6% to $4.74 ¼ a bushel, setting a one-year high for a spot contract.
Kansas City-traded hard red winter wheat futures for July stood up 1.8% at $4.81 a bushel, not quite matching the one-year high of $4.81 ¼ a bushel set in the last session.
In London, feed wheat for July stood up 0.8% at £146.00 a tonne, with the better-traded November contract adding 1.2% to £148.75 a tonne, earlier setting a contract high of £149.00.
Source: Agrimoney – Wheat futures renew rally, amid fresh worries over EU, US dryness
