Chicago Board of Trade wheat futures continue to lift in what looks like a recovery from seasonal and contract lows set at the end of August.
We just need to get through September to be truly clear of the bulk of the downward pressure normally exerted from the northern hemisphere wheat, corn and soybean harvests.
So far the recovery remains tentative, with roughly a US25 cents a bushel gain from the lowest daily close in August to the highest daily close in September.
If the market can have a solid daily close above last week’s highs, we should see futures prices post further gains of about US20c/bu to US25c/bu. This will be useful in adding close to $10 a tonne to the price base for wheat prices.
Support for gains in US wheat futures will need to come from corn and soybeans as they pass the point of peak harvest pressure.
Support for soybeans will also need to come from demand for oilseeds, which was a feature of market moves late last week. In turn, higher soybean prices will support the corn market, which can provide support for wheat. US wheat exports need gather pace again.
Early sales in the new selling season had US exports running 10 per cent ahead of last year, but in recent weeks that has been pegged back.
Increased exports of wheat from Russia will be a headwind for wheat markets though, but strength in the Russian rouble is providing some support for prices, and risks associated with selling into the Egyptian market have also seen prices for Russian wheat rise.
Another twist in global commodity markets has been a lift in the Baltic Dry Index which tracks the cost of bulk shipping around the globe. The impact can be twofold: it lifts the cost of wheat for importers, which can lower demand, and it can prevent cheap origins like the Black Sea from competing in long distance markets.
For Australia that may limit competition from Black Sea wheat into Asia.
Another aspect of the Baltic Dry Index is that it can be a barometer for general bulk commodity demand.
Some commodity analysts are suggesting that we could be seeing signs of a general global lift in economic activity, that is driving demand for raw commodities, with potential for a flow on effect to agricultural commodities.
Here in Australia the season continues to be harsh across NSW and Queensland. Current projections for Australia are indicating exports of 18.5 million tonnes, but if that pulls back to 14 million tonnes, as some are suggesting, it will remove more supply from global trade.
