Prices of higher-protein winter wheat soared to a 15-month high as weather forecasts signalled
further tests for the drought-tested US crop, with Ukraine unrest adding to the
Wheat prices rose on many markets as the Ukraine tensions stepped
up a gear, as Kiev ordered an offensive against pro-Russian separatists in the eastern
city of Slavyansk.
Two Ukrainian government helicopters have been shot down, killing
a two servicemen, and some other fatalities have also been reported.
With the Black Sea a major exporter of competitively priced wheat
– a factor underlined on Friday by the results of an Egyptian tender – prices
of the grain have correlated for most of this year with the level of Ukraine
However, while soft red winter wheat futures for July
delivery rose 1.4% to stand at $7.17 a bushel in Chicago, with 15 minutes of
trading to go, Kansas City hard red winter wheat for July was up 2.4% at $8.23 ½
a bushel, the highest for nearest-but-one contract since February last year.
The premium of hard red winter wheat against soft red winter
wheat, which for these contracts broke through the $1.00-a-bushel mark in early
deals, reached $1.09 ½ a bushel at one point.
The outperformance of hard red winter wheat, a higher-protein
type used for the likes of making bread, reflects the growing concerns over
crops in the southern Plains, its main US growing area.
A much-watched crop tour overnight pegged the yield in
Kansas, the top growing state, at 33.2 bushels per acre, below the average of 41.8
bushels per acre, and put the harvest at 261m bushels, which if realised would
represent an 18-year low.
The figure, from the Wheat Quality Council tour, was also
below estimates before the event of a production estimate of about 300m
North vs south
And it raised questions over whether hard red winter wheat
production will exceed the 744m bushels at which the US Department of
Agriculture estimates the last crop, despite higher sowings.
"I am amazed at the number of analysts who feel the hard red
winter wheat crop will be larger than last year's crop of 744m bushels," said Darrell
Holaday at Country Futures.
"We just do not thing the better conditions in the north and
west can offset the losses in the south, given the large disparity in the production
Benson Quinn Commodities said: "The tour estimate has many
traders factoring in hard red winter wheat production below 750m bushels, which
is a possibility,"
A figure at this level "merits the rationing of hard red
winter wheat demand", implying higher prices and a "switching to North American
spring wheat supplies", the broker added.
In fact, Informa Economics pegged the crop at 840m bushels,
on a yield of 36.4 bushels per acre,
The consultancy pegged the overall winter wheat harvest at 1.496bn
bushels, down 120m bushels from its previous estimate, and meaning a drop below
last year's 1.534bn-bushel result.
However, many traders were cautious over the Informa
estimate, with the group having a reputation for caution in crop downgrades.
Informa's estimates included an estimate of 20% loss on
winter wheat plantings.
Many investors fear further crop losses are inevitable,
given forecasts for further dryness in the southern Plains.
"The verbiage from the wheat tour indicates a better chance
that the Kansas crop goes down, as they hinted at better weather being needed
to ensure the current estimate," Benson Quinn Commodities said.
"Hot temperatures in a southern Plains region that has seen
very little relief are a supportive factor through the weekend."
MDA said that, short term, "moisture will remain very short"
in central and south western areas of the Plains wheat belt, "further stressing
The six-to-10 day outlook "has tended drier in the central
and south western Plains."
'Very cold to very
At Martell Crop Projections, Gail Martell said that, after
temperatures of 28-32 degrees Fahrenheit
(-2 to zero Celsius) overnight in Kansas, "the pendulum is set to swing from
very cold to very hot", with temperatures in the low 90s forecast for Sunday.
"Ordinarily, a hard freeze in May would make the headlines,
but the severe drought is the main story in hard red winter wheat," Ms Martell
CHS Hedging said that "temperatures up to 100 degrees Fahrenheit
(38 degrees Celsius) are forecast for parts of Oklahoma Sunday-Tuesday".
The stronger market conditions were somewhat muted in Paris,
undermined by the results of the Gasc tender underlining that French wheat is
not competitive with Black Sea supplies on export markets, when a big Saudi
Arabian tender is out there too.
Paris wheat for November, the best-traded contract, added
0.2% to E206.00 a tonne.
London wheat for November gained 0.4% to £158.20 a tonne.
'Major move in planting'
Back in Chicago, the jump in wheat prices contrasted with a tumble
in corn futures, undermined by the
warmer and drier US weather which, for Corn Belt farmers, will prove a boon in
"Models are still pointing to warmer temperatures next week
in the Midwest and Corn Belt, which will result in a major move in corn and
soybean planting," Country Futures' Darrell Holaday said.
At RJ O'Brien, Richard Feltes said that USDA crop progress
data on Monday should show corn sowings advancing "from 19% last week to 32-35%,
and possibly to 58-60% by May 19".
And while sowings further north may remain delayed, "remember
that timely planting and high yields in portions of Midwest can go a long way
in offsetting sub-par yields in late planted areas".
There remained signs of demand, with Israeli buyers
purchasing 108,000 tonnes of US/ South American corn.
This following a string of upbeat US export sales data.
However, futures faced technical difficulties too, with the
best-traded July contract closing below $4.99 ½ a bushel, surrendering the
psychologically important $5.00-a-bushel mark.
The contract also closed below its 40-day moving average for
the first time in three months.
Against wheat, corn's discount rose above $2.16 a bushel.
Corn's fall offered some support to soybeans, through investors spreading row crops.
Spreads between soybean contracts proved a feature too, with
Citigroup's Sterling Smith noting that "bull spreading is evident in both the
soymeal and the slightly stronger soybeans".
Still, "strength looks to be covering and on loan from other
items", he added.
That said, Bunge's chief executive, Soren Schroder,
underlined prospects for higher soybean crushing margins ahead in the high profile
market of China, the top importer of the oilseed.
While July soybeans rose 0.7% to $14.70 ¾ a bushel, new crop
November soybeans eased 0.2% to $12.22 ½ a bushel.
Among soft commodities, cotton
edged 0.1% higher to 94.32 cents a pound, helped by a small upgrade by the International Cotton Advisory Committee to its price forecast, and by dryness
in the southern Plains.
Dryness is spreading in Texas, the top US cotton-producing state,
with 74.5% rated in drought according to official data on Thursday, up 5.8
points week on week.
But many other softs were weak, including cocoa, which edged 0.2% lower to $2,917
a tonne in New York, for July delivery, undermined by expectations for a strong
mid-crop in Ivory Coast, the top producing country.
are generally good'
New York raw sugar
for July tumbled 2.0% to 17.45 cents a pound, sapped by the onset of Brazil's
harvest, boosting supplies and so sending market power buyers' way.
"Ideas that the Brazil harvest is underway is keeping the
market in a trading range, even with better demand talk," said Jack Scoville at
Price Futures Group.
"World weather conditions are generally good. El Nino is probably
coming that could hurt yields and disrupt the harvest later in the year, but
for now the drier weather promotes rapid harvest progress."
Technically, Citigroup's Sterling Smith noted that a "failed
mid-week rally", with a revival in the July contract topping out at 17.88 cents
a pound on Wednesday, was "leading to long liquidation".