Just how low will futures go?

That matched the low recorded on April 24 this year, and apart from a period in late March, is the lowest we have seen the July contract since January.

Last year nearby futures were about US425c/bu in November, before plunging to near US400c/bu in December. 

This year, with projections for a decline in global wheat stocks, and the specific issues in the US and emerging in southern Russia and other hot spots around the world, the view is that futures should be trading at higher levels by November.

Some are suggesting that last week’s low is overdone compared to where the market should be trading by our harvest time. 

So, while we might still see value lost off December futures from last week’s low of US501.75c/bu, it should be minimal in the end.

Also, in a “normal” year it would be too early for the seasonal low to be in place, and yet to go lower than last week’s low will leave the market well below levels seen as reasonable for the end of year.

It indicates that last week’s selloff has been overdone and premature. 

If so we could be in for a corrective bounce, which has in fact already begun, with a US25c/bu lift from mid week lows to the highs in trading last Friday night.

The sentiment is that we should go into the start of July with the futures price base at levels above those seen during last week’s low.

From there the market will have to balance several drivers, including the quarterly US stocks report and final planted acres estimates for all US crops this year, as well as how the season is unfolding in Canada, the EU and Black Sea, and the July US Department of Agriculture Report, which will give an update to global production and stock numbers.

The driver behind the volatile week last week was the US trade war with everyone. 

For grains the main links are through the soybean trade with China. 

This saw soybean prices pushed to 10 year lows. 

Corn and wheat were dragged lower.

In the US there has also been near ideal conditions for the corn and soybean crops, except that it has now become too wet. 

The old adage is that mud makes grain, but some are suggesting that it might be too much, and pull final yields down if it continues.

Rains have helped restore confidence in Canadian crops, but they had hit another dry patch late last week. 

The big one is Russia, where rainfall in southern Russia has been just 25 per cent of average over the past two months. 

That’s like a dry finish in September and October for their winter crop, and a dry July and August for their spring wheat crops.

While large stocks in Russia are depressing any price response to the current hot dry conditions, the market will have to make an assessment in early July, and it may be a factor that helps support wheat through the next round of USDA Reports.

Corn is another crop to watch, where the global balance sheet has tightened to generate the lowest stocks to use ratio in a long time. 

That could become another supportive factor in giving us wheat futures prices above last week’s low by the time November arrives.