If Chicago Board of Trade wheat futures are going to rally, then June is a prime time for it to happen. We have had a mid-year spike in CBOT futures values in every year of the past six, and this year there are enough factors at play, in combination, for the seasonal pattern to be repeated.
Most of the factors that might drive the market higher are related to seasonal growing conditions, either at the moment, or earlier in the growing season.
For example, there are concerns being expressed about the Russian crop, not from the current conditions given that some rains have arrived, but from damage to crops earlier in the season. This has led to a round of production forecast reductions even as rainfall arrived in key parts of southern Russia and Ukraine.
Adding to concern about the Russian and Ukrainian crops is the ongoing dryness in western and northern Europe. Again, some places are getting rains now, but others are still missing out, and conditions are forecast to be warmer than normal, putting additional pressure on soil moisture levels. Some crops never established that well either because of the overly wet conditions at planting time and during winter.
Then we have parts of the United States central and southern plains experiencing an increase in drought conditions, as well as damage from late frosts. This could impact the Hard Red Winter wheat crop that feeds a significant part of the US wheat export program.
These weather issues on their own should be enough to drive a price rally as June unfolds. With three key global production zones being impacted at the same time it should provide a base from which prices can rally.
So, what may stall a seasonal push higher this year? As always it would be rain, but this year it will need to be good rains across multiple regions to change the impact of the current situation. That is always possible, and as we know in Australia, a strong finish to the season can have more impact that a weak start.
This year we also have the coronavirus. While we have already experienced a virus driven price spike in March, there could easily be another one.
If we see the global production estimates pulling back a little more, particularly from a low cost origin like the Black Sea, importers may begin to worry about security of supply again and step up their pace of purchases.
That might become the ultimate trigger for a mid-year price rally, particularly if supply chains come under threat from closures or disruptions from outbreaks of the virus that result in targeted shutdowns of key facilities, either at the export end or at the import end.
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