Last week's United States Thanksgiving period was not good for Chicago Board of Trade wheat futures. Sharp losses were incurred leading into the holiday, with only a partial recovery on Friday night. Overall, the market shed $A7 a tonne over that period.
Good progress on the Australian and Argentine harvests is also not helping support the market, but outside of that, a projected 1 million tonne lift in Russian exports was also a negative.
March wheat futures plunged 21 US cents a bushel on the eve of Thanksgiving, and only recovered by 9.5 US c/bu coming out of the holiday.
The drop in prices has made US wheat very competitive against the Black Sea and EU. This was already in train before Thanksgiving though, and saw US weekly wheat exports hit a new high for the year when reported last Friday.
One of the main buyers of US wheat was China, with 333,000 tonnes reported. They are buying more wheat than usual this year, mainly from the US. It is white wheat as well, which we normally supply. Australia is not participating in this Chinese business as our trade issues with China escalate.
While reports of a lift in Russian exports for this year were a negative for US wheat futures last week, a more positive tone was set when initial forecasts for the 2021 Russian crop were set at 6mt under those of 2020. This is reflecting the drought conditions that have hit the start of their growing season.
While a smaller Russian crop will be helpful for wheat prices, at 78mt it will still be a sizable crop, particularly if there is a lift in carryover from the large 2020 crop. Also, while drought has hit development of the newly planted Russian winter wheat crop, it will really be what happens in the first six months of 2021 that will determine the final production outcome.
We won't really know until the middle of 2021 though, and this is why a poor crop condition now is likely to be an underpinning factor for wheat futures as we move into the early part of 2021.
Wheat may also start to get support from an expected sharp drop in corn production in Brazil. Tighter global corn supplies should result in more demand tipping over to wheat to meet industrial and feed grain demands.
Meanwhile the Australian market has not reacted well to the decline in CBOT futures, with key export-based prices falling below $300/t. While prices should get some support for the start of this week with follow through from the partial recovery last Friday, the post Thanksgiving Day prices were the lowest since the third week of September.
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