Wheat is rebounding today from levels of $606 per bushel to close to $630 after a record sell-off of more than 15%. In the absence of any significant news that may have contributed to the increases today, which coincided with the US market opening, we can consider that the catalyst may have been an update of weather forecasts for the US, which is expected to bring a heat wave, in many states, in the coming week.
- In addition, tomorrow, the USDA will release the June WASDE report on global supply and demand estimates. The report could raise volatility and again lead to changes in large speculative positions on the Chicago Commodity Exchange (CBOT). The consensus is for an average estimate of 1.88 billion bushels, up from 1.858 billion in May, indicating an increase, despite warnings from Sovecon and regular downward revisions to Russian wheat production due to May's frost and June's hot drought.
- The market felt that a strong U.S. harvest and fairly favourable weather, with high quality crops and record plantings, would limit the impact of lower supply from Russia. In addition, the price drop was compounded by Turkey's decision to halt Black Sea wheat imports, suggesting a relatively lower risk from the complicating supply situation in the basin, which is an arena of fighting between Ukraine and Russia.
- A U.S. NASS report indicated that the winter wheat crop in the U.S. is 12% complete; however, the crop status has been revised slightly downward, at a time when a heat wave is expected in the U.S., which could move toward the key grain-producing middle states. The U.S. high and very high grade crop ratings fell to 47% from 49% a week earlier. In turn, the Brugler500 index, which takes into account changes in all grade levels, fell symbolically by 3 points to 330. Spring wheat planting according to the NASS survey was 98% complete. This is above the five-year average of 96%.
WHEAT (interval H1)
Source: xStation5
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The U.S. market harvest is progressing faster relative to the historical average, but the latest USDA survey of very good and excellent quality wheat indicated a lower than previous result, and the weather in the U.S. may be hotter and drier in the near term. Source: Bloomberg Finance L.P.
