HRW (Gulf)* reached its 13 months maximum on Tuesday May 6 (US$ 366/t) then started to decline and closed on Friday (5/09/2014) at US$ 357/t.
France Grade 1 (Rouen)** touched level of US$ 297/t on Tuesday May 6 2014, but then dropped to US$ 287/t and remained stable for the rest of the week.
Wheat prices began to firm in late January when the Ukrainian/Russian crisis started to look serious. Unlike many such rallies that are spurred by geopolitical crisis, this one did not fade away after a few days or weeks. Normally, the headlines create panic and traders react spontaneously, but after assessing the facts, prices retreat. This time, however, situation is more serious:
- Most Ukrainian grain exports are shipped abroad from Black Sea ports on Crimean shores – now effectively controlled by Russia. There are still 2.5 million tonnes of last year crop wheat commitments remaining to be shipped. Exports from the upcoming crop, which will be harvested this summer, also remain vulnerable to the viability of Black Sea ports. European wheat futures, however, fell on Wednesday after comments by Russia's president suggested a possible easing in tensions with Ukraine and as the U.S. wheat market dropped after a weather-fueled rally this week.
- Second reason of the wheat price spike is continuing dry conditions for the large wheat production areas in the US. US farmers probably will harvest the smallest winter-wheat crop since 2006 after freezes damaged yields and drought conditions persisted for the fourth straight year in the Great Plains, according to a survey of 20 analysts and traders by Bloomberg News.
Wheat fell to the lower level towards the end of the week, after the USDA said global reserves will climb even as dry weather cuts production in the U.S.. The US is the biggest wheat exporter, while Russia and Ukraine are expected to rank fifth and sixth in the 2013-14 season, according to the International Grains Council.
WASDE: Global 2014/15 wheat supplies are projected down less than 1 percent from 2013/14 as reduced beginning stocks and production in the United States offset higher foreign beginning stocks. World wheat production is projected at 697.0 million tons, down 2.4% from the 2013/14 record. Foreign production is projected 12.4 million tons lower in 2014/15 with increases for Argentina
, the European Union, China
, and India
more than offset by reductions for Canada
, and Syria
. Lower area and a return to trend yields also reduce production in Canada from last year’s record high. In the Middle East, persistent dryness and early April freezes have severely damaged winter wheat crops from Turkey to northeastern Iran. For Ukraine, lower reported area and a return to trend yields reduce expected output.
World wheat inventories will rise 0.5 percent to 187.42 million tons in the marketing year that begins June 1 from 186.53 million this year, the USDA said. World trade is forecast to fall 6.3 percent to 151.8 million, the agency said.
Bangladesh: Bumper wheat yield fails to make farmers happy as the prices are too low to bring any profit. The prices show a downward trend but farmers have to sell their produce for low prices to repay the loan they took with a high interest rate for the cultivation. Meanwhile, the government's wheat procurement programme that started on April 1 to support the farmers has virtually failed to serve the purpose as the growers have to sell the produce for much lower than the government rate. India
: ITC, Cargill and other private companies increase wheat procurement
Arrivals and procurement trend also indicate that the size of the crop could be better than last year. Also, damages to the crop on account of multiple spells of unseasonal rains over the past few months could be lower than what has been feared. According to the second advanced estimates, wheat production is expected to touch a record 95.6 mt this year.
Private companies and multinational traders from ITC, Cargill, Noble, Louis Dreyfus, Glencore, Midstar, Concordia, Bagadiya Brothers and Emmsons are giving a tough competition to Food Corporation of India (FCI) in the procurement of wheat. Apart from procuring the grain for export from Rajasthan, Gujarat and Madhya Pradesh, the private sector has also entered Uttar Pradesh, Punjab and Haryana market this year.
The Government had set a procurement target for wheat this year to 38.1 mt, which was later scaled down to 31 mt (last year, wheat procurement stood at 25.04 mt). Despite a month-long delayed start to wheat harvest, progressive procurement of the cereal by Government agencies has picked up in the last few days. FCI has also extended the deadline for procurement from April 30 to May 15. However many believe that FCI is likely to miss its wheat procurement target of 31 million tonnes (mt) by about 15 per cent and end up with about 25 mt, a six-year low.
Also, this year saw significant hoarding by farmers. Expecting a surge in prices and anticipating an impact of the El Niño weather phenomenon on agricultural commodities in the coming months, they have diverted substantial quantities of wheat to private granaries.
Lachstock Consulting predicts decline in Australia’s wheat crop to 23.7 million tonnes. The decrease is mainly due to Western Australia’s crop achieving average yields rather than the record yields reached last season. But with new crop prices at high levels, it forecasts about a 5 per cent increase in wheat plantings to 13,894,000ha on last season figures.
Romania might report an annual wheat crop of 6.7-6.9 mmt this year, local grain trader XTB Romania reported based on data supplied by Coceral. Export potential would consequently be around 3.3 mmt. Romania exported 3 mmt of wheat in H2 last year alone. UK
- The UK could return to becoming a net exporter of wheat in the coming year. This was the claim from HGCA. The body said, subject to good yields and quality, the 2014 crop would be the first since the 2011/12 marketing season in which more wheat was exported than imported. But a greater amount of wheat is likely to mean a deterioration of prices over the next few months as UK grain would need to be priced competitively for export markets.
US wheat supplies for 2014/15 are projected down 10% from 2013/14 with beginning stocks, production, and imports all expected lower. Supplies for the new marketing year are projected to be the lowest since 2007/08. The survey-based forecast for 2014/15 all winter wheat production is down 9 percent on the year with the harvested-to-planted ratio just above last year’s 11-year low and the yield forecast at its lowest level since 2007/08. Most of the decline year to year in winter wheat reflects lower area and yields for Soft Red Winter wheat. US
- Kansas: the 57th annual Wheat Quality Council evaluation tour estimate is lowest in 18 years. The estimate, made by 55 participants who were part of a pool of 74 total scouts, is the lowest estimate since 1996. The tour made 587 field stops this year, compared with 570 a year ago. The calculated average for those 587 stops was 33.2 bushels per acre, compared to 41.1 bushels on the same routes in 2013.
- Oklahoma: Drought devastates Oklahoma’s wheat crop. The Oklahoma Wheat Commission says this year’s crop will go down in history as one of the worst in decades. The crop is down 38% from the previous five-year average.
: The wheat stem sawfly, one of the major pests of wheat, has been on the move – and not eastward as many might think. Scientists and producers in Nebraska and Colorado are reporting the wheat stem sawfly has been moving into fields and affecting yields in their states. While they were aware the sawfly had been spotted there, the fact that it was becoming a major pest was a surprise. Colorado Extension agents reported the sawfly was starting to spread in 2010, and Nebraska Extension reports the sawfly started to spread in their state in 2012. While grasses in those states were already infested, the winter wheat fields had been left relatively alone until the last couple of years, according to Kansas State Research and Extension.
: Importan trigo en plena cosecha
The president of the Farmers Association of the Culiacán River criticized that just last week, when the wheat harvest is in full swing, a ship loaded with 11 tons of wheat arrived in port of Topolobampo. However, most of the wheat grown in this part of Mexico is durum. Mexico is net importer of bread wheat. Government is designing a plan to encourage broader cultivation of the bread wheat in Mexico.
Argentina: Private sector estimates wheat crop reaching 14 million tonnes – counting on increase of planted area from 12 to 15% and reaching 4.1 million hectares.