The weather-driven rally in wheat prices continued last week, as it did for corn, soybeans and canola, extending the rally to five weeks.
Nearby wheat futures have had their highest daily close for the rally, but just failed to take out the intra-day high set on April 27. However, September and December futures did make new highs on Friday night last week, as well as setting new closing highs.
February 2013 is the last month that we had a daily closing price higher than the close last Friday night. That is how long it has been since nearby futures traded above 750 US cents a bushel.
The peak in the market in July 2012 was 947.5 USc/bu on continuous charts, so we are still 180 USc/bu short of that benchmark.
2012 was one of those classic years where wheat futures rallied sharply in May and June, peaked in July, but held at high prices until the end of November. That is the classic weather issue in the growing season turning itself into an actual problem that supported higher prices right into the Australian harvest period.
This year is travelling in a traditional fashion with the real surge in prices to date unfolding in April. May is yet to show that it can take out the April high, which will be the next step towards consolidating the current higher prices for longer than just a brief price spike.
We need to see May prices move higher, and even if they pull back, we then need to see June prices overtake the May highs. That will be the signal that all the issues driving the current weather rally have actually translated into a real hit to the global wheat crop.
Of course, it is not all about wheat. The corn and soybean markets will also play their part in underpinning grain prices in general. The dryness in Brazil is continuing to cut into the yield potential of their current safrinha corn crop. This could push China to keep purchasing US old and new crop corn.
It is also remaining cold in North America, with unseasonal May snow still hanging around. While there is moisture in forecasts for some parts of the US and Canadian spring wheat areas, it is still cold, which has the potential to slow the development of newly planted corn in particular.
Already 2021 is being described as the year without a spring for some parts of the northern hemisphere. If that extends into an early onset of winter in late 2021, the short growing season will become a real issue, particularly if the peak of summer heat in the US coincides with corn flowering and soybean setting.
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