North American wheat markets have been treading water for the past few months, with prices struggling to show much life.
Minneapolis spring wheat, the most closely related futures contract to the Prairie cash market, has held in a sideways range just above contract lows for the better part of two months, with no indication that it may break one way or the other.
The most active July contract was well below all its major moving averages, but at the same time not oversold from a chart standpoint. The July futures hit a contract low of US$6.35 per bushel at the beginning of April and were hard pressed to move much above that in weeks since. A move back above $6.60 per bushel could be supportive from a chart standpoint, but prices would have to move back above $6.80 to signal a break in the downtrend.
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Dryness concerns in some winter wheat growing regions of the United States have provided underlying support for wheat prices in general, but there has also been enough shower activity to blunt any rise.
About 81 per cent of Kansas, the biggest producer of winter wheat, has extremely dry or drought conditions, according to the U.S. Drought Monitor. Some key wheat growing areas in Australia are reportedly dry in the early stages of planting, but relief is in the forecast with the impending end of El Nino conditions and anticipated change to La Nina.
Rain in the forecast for some already wet portions of Europe could be supportive if the precipitation persists, while dry weather in the Black Sea region was also followed closely. The ongoing conflict in Ukraine should again limit grain production there.
The U.S. Department of Agriculture’s Foreign Agricultural Service estimates that planted wheat area was down by five per cent on the year, although total wheat production could fall by as much as nine per cent. Ukrainian wheat exports are forecast to fall by even more, dropping 27 per cent, to 12.8 million tonnes, according to the USDA attaché.
However, Russia is more than making up for the slack elsewhere and remains the bear overhanging the global wheat market. Russian wheat exports are undercutting supplies from other destinations.
Wheat bids in Western Canada are a far cry from where they were at this time a year ago, but unlike canola, the demand is still strong for Canadian wheat. Exports are moving at a record pace, with 15.3 million tonnes exported through 37 weeks, according to Canadian Grain Commission data. That’s up by about one million tonnes from the same point in the previous year.
