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A current US crop tour confirmed that the northern Kansas wheat crop has suffered from drought and freeze stress, lowering yield potential by just over 10% year on year.

However, the tour moved eastwards on Thursday into an area where increased levels of moisture have been received, and we await to see in what condition the crop is reported.

Additional support has surfaced from dry and warmer-than-normal conditions in the Black Sea region, Australia and parts of Eastern Europe, while Argentina, after suffering months of drought, is now being hit with excessive rains, which is leading to problematic planting conditions for their wheat sowings.

Statistics Canada, however, did report that Canadian farmers intend to plant 25.3mln acres of all wheat varieties in 2018, up 12.8% year on year and higher than trade expectations, although current global weather concerns outweighed the release.

Paris wheat hit a six-month high on both old and new crop this week as the trade returned from the May Day holiday and played catch-up with the US market. Additional support stemmed from the euro’s move to a four-month low against the US dollar.

However, there remains little evidence of a potential late-season bounce in EU exports, which still run 22% lower year on year. Trade focus is now on new crop and its weather issues, both within the EU and the Black Sea region.

Old-crop London wheat is little changed, up 50p on the week. However, new crop is trading £4/t higher as sterling’s continuing slide reduces the likelihood of a May interest rate hike.

The release by DEFRA this week of its Basis Payment Scheme Data for 2017 showed that payments to English growers equated to a wheat area 45,000ha below official crop data.

Working on regional yields, this would suggest a 360,000t fall in the 2017 UK wheat crop, assuming Scotland, Wales and N Ireland are unchanged. That would tighten the balance sheet further for 2017-18 and provide less carry-out into the 2018-19 marketing season.

UK end consumers have so far taken comparatively little new crop cover and, with farmers having had a reasonable sell to date, they may find they are forced to come to a market which has little inclination to sell more at present. 

Gleadell comment

In summary, real crop and weather issues should help underpin the markets. US farmers will strive to get spring crops planted, but the planting window for maximum yield potential is closing.

Chicago fund shorts are heading for the exit, covering their position, although it will be of interest if they have the same appetite to go long of the most expensive feed wheat in the world.

Markets have reacted aggressively over the past weeks and could respond in a similar vein if any price corrections are required.