Following the sharp rally in Chicago wheat futures at the start of March and the slow retracement since, the market is now back to pre-rally levels.
Despite smaller crop prospects, the US struggles to find demand for wheat above current prices as evidenced by the dismal most recent US export sales figures.
The full extent of the price action never fully converted into Australian old crop wheat prices, but it did allow some growers sitting on stock to shift grain, rule a line through 2017-18 marketing and perhaps justify the decision to hold through harvest. Selling inquiry (in both wheat and barley) has now slowed once more as the remaining owners settle in for the long haul.
There was a dead-cat bounce in the canola price that coincided with February end of month, resulting in a dribble of selling. After last year’s big plant, canola planting intentions for 2018-19 may slip 15 to 20 per cent.
A lacklustre price, a high cost to grow and general lack of early moisture might see more canola acres ousted in favour of lower cost cereals.
New crop wheat futures hit levels not recorded since August last year and there were a few willing to start the selling campaign for 2018-19 in small volumes.
Still, price seems extraneous when soil moisture across the NSW cropping area is largely “below average” or worse, and the sowing window is fast approaching.
The Bureau of Meteorology released its climate outlook for April to June last Thursday, declaring La Nina has decayed and no strong indications for either a wetter or drier period.
Being sold (short) wheat futures has been like money for old rope for the investor community in the past few years, but the tide seems to be turning as the Commitment of Traders Report (using March 6 data) showed the non-commercial sector have turned the negative bets to positive (long) ones.
Highly possible that the non-commercials will re-establish their sold position, but likely they will wait till the crop is further progressed before doing so. And if the past three years are any indicator, we might get a better (albeit fleeting) pricing opportunity mid-year, usually followed by a long slow grind lower into our harvest.
The one thing you can count on are prices overshooting and undershooting before the fair price is found.
The flag towards downside is current weather issues in the US and South America of which seem to have been factored into respective commodity prices, momentum has stalled for the moment and we are in need of some fresh news.
Talk of trade wars is not bullish for commodity prices and will continue to send the complex lower as they gather newspaper centimetres.
