THE rally in the wheat market stalled coming into the end of last week, with futures down US6.5 cents a bushel for the week, and in Australian dollar terms down $2.50 a tonne.
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The decline was reflected into our cash market, with new season Australian Premium White (APW) prices dropping by about $3/t across most port zones.
Although US wheat exports have been robust, there is concern that the US is not getting as much of the export business into the Middle East and North Africa as it might have done on some of the recent tenders.
The lift in US wheat prices in this latest rally just makes it that little bit harder as well, and will serve to keep the price gains in check.
On the weather front, the main news is the dryness across parts of the US winter wheat belt.
A lot of their new crop is being planted into less than ideal conditions.
The forecasts are also for high temperatures this week, and that will add to the need for rain to get crops established before winter sets in.
The area being planted to winter wheat this year in the US is also under pressure, with some forecast suggesting that the area could fall by 700,000 acres to its slowest area since 1913.
Spring wheat plantings are likely to increase a little, but not enough to prevent a reduction in the total area planted to wheat in the US for the 2017 season.
Unfortunately, the drop in acreage is not likely to be repeated globally, with growers in Europe and the Black sea regions not facing the same price falls as US farmers, because of currency moves.
Another issue is how the season might develop.
September has been declared the hottest September on record globally, despite the cold conditions across much of Australia.
While that might be linked to current dry conditions for planting winter crops, we would not want to see yet another mild winter across parts of the northern hemisphere.
Last year’s big Russian crop is being attributed to a mild winter, and exceptional crop development as a result.
If that trend continues, and we see little change in production, it will be a serious problem for any recovery in wheat prices in late 2017.
As it stands, a shift back to more “normal” production conditions across the globe should see the growth in wheat output stalled, with a possibility that output will even contract.
That will be a very positive outcome for helping address the oversupply of wheat outside of the US and China.
If that couples with reduced production in the US as they pull back on their plantings, it would go a long way to preventing 2017 prices dipping las low as they have done during 2016.
The key to wheat prices during 2017 will be what happens in the Black Sea region.
Speculation about their crop, as well as the US and EU crops, during our autumn should deliver us the post harvest selling opportunities that growers storing wheat will be looking for.
What actually transpires for the Black Sea crop won’t become apparent until midyear.
If there are issues it will be a driver for stronger midyear prices, as we have seen every other year since 2007 that we have had a seasonal, or politically, driven interruption to the expected flow of exports from Russia in particular.
