US wheat futures prices Thursday were unable to sustain Wednesday’s rally after traders re-examined world stocks and decided that a big rally may be premature, although still feasible.
Wheat prices also were pressured Thursday by investors reducing their Sep long positions with first notice day today, market analysts said.
However, with tightening world supplies, there may be a limit to how far they can fall. The USDA has predicted lower world grain output for the second year, with consumption rising to record highs, meaning end-of-year stocks could fall significantly, market analysts said.
Drought conditions across much of the EU mean wheat prices still may rise, but the market hasn’t sent the proper signals for a demand-driven bull market, analysts said.
There has been talk in the trade lately that Russia may soon limit wheat exports with an export tax after a short harvest this year of poor milling quality wheat. However, Russia continues to export wheat as sellers try to get ahead of such an export tax, and the Russian Ministry of Agriculture confirmed that it was not imposing export restrictions.
Reuters reported that Russian consultancy IKAR Tuesday lowered its estimate of the country’s 2018 wheat harvest to 69.6 million tonnes from the previous estimate of 70.8 million. Adding to the concern among those in charge in Russia was that IKAR left its Russian wheat export estimate unchanged at 32.5 million tonnes.
MARKETS VOLATILE
The market remains nervous, though, as Reuters reported that two trade sources told reporters that Russia’s agriculture ministry is to meet grain exporters on Monday to discuss the market situation. The Ministry’s addition of the words “for now” haunt the trade.
US wheat export figures remain disappointing to traders, and were blamed for at least part of the continued pressure on US wheat futures. EU export volumes also were behind last year.
But a weakening of the pound against other currencies amid speculation of a “hard Brexit” has made UK exports more competitive into Europe where grain supplies have been crimped.
Adding to the what market’s volatility are International Grains Council predictions for global corn stocks at the end of the current grain year to fall by 41 million tonnes to 256 million. At current consumption rates, this would be just 12 weeks’ worth of consumption.
The IGC’s outlook for world total grains production in 2018/19 was raised by 4 million tonnes from its July estimate to 2.063 billion but still was expected to show a second straight annual decline in 2018/19.
Month-to-month cuts to the IGC crop production estimates in the EU and Australia were offset by gains elsewhere, including the US, Ukraine and Argentina.
The IGC said the corn crop next year could be up mainly on potential improvements in South America where planting is just beginning.
CATTLE, BEEF RECAP
No fed cattle sold Wednesday on the Livestock Exchange Video Auction, compared with 280 that traded the previous Wednesday at $109.50 per cwt.
Cash cattle traded last Wednesday at $107 to $108 per cwt, down $1 to $2 from last week. On a dressed basis, cattle sold at $168 to $169, down $3 to $4.
The USDA choice cutout Thursday was down $0.95 per cwt at $211.73, while select was off $1.34 at $202.21. The choice/select spread widened to $9.52 from $9.13 with 77 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Wednesday, was $150.09 per cwt, down $0.14. This compares with Thursday’s Aug settlement of $149.47, up $0.15 and the Sep settlement of $150.17, up $1.00.