Wheat

Higher on strength in Minneapolis Grain Exchange (MGEX) spring wheat futures tied to forecasts for more stressful weather in the northern U.S. Plains. Front-month CBOT wheat touched its highest level since November 2015 in early moves. MGEX wheat set across-the-board contract highs, with most-active September reaching $8.12-3/4 a bushel before paring gains.

Prices of wheat were down in spot markets ahead of the rollout of goods and services tax. Wheat buyers are waiting for the implementation of the tax reform as it would do away with state taxes. Prices in Delhi have fallen by 30-40 rupees in last 10-15 days. NCDEX the most-active August wheat contract ended down 0.1% from previous close.

International Grains Council has cut its estimate for global wheat output in 2017-18 to 735.1 million tonne from 735.9 million tonne forecast a month ago. The downgrade may be attributed to fall in output in the US, European Union and Australia, the report showed. The losses were, however, limited by higher production in Russia. The council has pegged global wheat consumption in 2017-18 at 735.5 million tonne, sharply down from 737.8 million tonne estimated earlier. Global ending stocks of wheat in 2017-18 are estimated at 241.2 million tonne, up from 238.6 million tonne forecast in May.

The recent rally in prices of wheat in the global market has caught the Indian market by surprise. Market players, who were banking on cheaper imports to meet demand in the lean arrival season, would now have to turn to the domestic market to source wheat and that could effectively push up wheat prices by about 200 rupees per 100 kg over the next couple of months. Wheat prices usually start ascending by Jul-Aug as arrivals come to a grinding halt and government winds up procurement operations. The government offer price under the open market sale scheme usually acts as a benchmark for wheat prices during the lean season.

Price growth persisted in Russia new-crop wheat market last week. In Novorossiysk port, export prices for Russian milling wheat closed the week up another $2-3/MT at $185‑187/MT FOB for 12.5%-protein wheat and $177‑180/MT FOB for 11.5%-protein wheat.

U.S. wheat prices jumped 4 percent to hit their highest in nearly two years as forecasts for continued dry weather in key U.S. growing regions stoked fears over possible production losses. The most active wheat futures on the Chicago Board of Trade had risen 4 percent to $5.47-1/4 a bushel, the highest since July 20, 2015.

Prices of wheat continued to fall in the major spot markets across the country due to lukewarm trade as dealers refrained from buying ahead of rollout of goods and services tax from Jul 1. In the benchmark market of Indore, Madhya Pradesh, the mill-quality wheat was traded down 5-10 rupees from previous close. In Delhi, a key wholesale market, wheat traded down 10 rupees from the previous day.

Global wheat production in 2017-18 was seen at 735 million tonnes, down one million tonnes from last month and below the previous season 754 million. Production in the United States was cut to 48.6 million tonnes from 49.6 million while the EU crop was put at 149.4 million, down from a previous forecast of 149.9 million.

European wheat futures rose sharply after a week-long slide, supported by a surge in U.S. prices that countered strength in the euro. Front month September milling wheat on Paris-based Euronext was settled 3.50 euros, or 2.1 percent, higher at 173.25 euros a tonne, after breaching chart resistance around 172.50 euros. European Union data showed EU soft wheat exports had reached 23.3 million tonnes by June 27, in the penultimate weekly data release for the 2016/17 season that ends on June 30. Soft wheat exports were down 26 percent from a year ago.

Ukraine reserves of grains and pulses totaled 8.84 MMT as of June 1, 2017 that is 10.8% more than at the same time last year (7.98 MMT). Wheat stocks decreased 22.3% to 3 MMT against 3.87 MMT reported as of June 1, 2016. Corn stocks are 49.5% up from last year, amounting to 4.59 MMT (3.07 MMT). Barley inventories are 1.3% up from last year, amounting to 519 KMT (512 KMT).

Russia continued exporting wheat at a record pace in May 2017, when 1.92 MMT was shipped abroad. This is 46% more than exported in May 2016. This season exports of Russian wheat have gained almost 2 MMT (8.4%) against the same time last year and reached 25.74 MMT. Russian wheat exports to the Egyptian market have hit a five-year high in the current season. Russia supplied 6.63 MMT to Egypt in the eleven months of MY 2016/17. The previous record was registered in MY 2011/12 (roughly 7.35 MMT).

Chicago wheat futures rose for a third consecutive session with prices underpinned by dry weather threatening to reduce U.S. spring crop production. The wheat market has been supported as crop conditions in the northern U.S. Plains spring wheat region have deteriorated sharply in the last month due to hot and dry weather. Analysts expect the U.S. Department of Agriculture on Friday to lower its estimate of U.S. spring wheat plantings for 2017.

Kazakhstan wheat production is likely to decline by 2 million tonne to 13 million tonne in 2017-18 (Sep-Aug) as acreage under wheat is expected to fall. The country wheat exports, however, are seen slightly higher in 2017-18 at 7 million tonne against 6.8 million tonne in 2016-17 due to an increase in closing stocks. As on Jun 1, Kazakhstan had 5.6 million tonne stock of wheat, compared with 4.3 million tonne a year ago.

CME Group has announced it launch Australian wheat FOB (Platts) futures contracts on Jul 24 and available for trading on CME Globex. FOB or free on board indicates that the supplier pays the shipping costs. The contract listed with and subject to the rules and regulations of the CBOT. The financially-settled contracts take reference from the Platts daily assessment of the Australian Premium White wheat spot prices. This new contract helps international traders and give them exposure to Australian prices without having to take physical delivery.

The government has sold 77,000 tonne wheat under the open market sales scheme in the current fiscal year so far. For 2017-18 (Apr-Mar), the government has set the average price at 1,790 rupees per 100 kg for procuring states and in non-procuring states, the reserve price rises by an amount equal to ex-Ludhiana railway freight. Higher prices have kept buyers away so far, and the quantity sold was only 19% of 409,100 tonne offered. The first tender was floated on Jun 15, offering 355,950 tonne for sale, of which only 36,000 tonne was sold. The second tender was released on Jun 22, and offered 373,100 tonne wheat but only 41,000 tonne was sold.

Prices of wheat fell in Delhi as buyers refrained from purchasing the grain due to lack of clarity on goods and services tax, to be implemented from Jul 1. In Delhi, mill quality wheat was sold down 10 rupees from previous close. Traders are not buying now, as they fear holding stocks ahead of GST as once they get a clear idea, they start accounting once again. Unbranded wheat is kept under the 0% tax slab under the new tax regime, while packaged and branded wheat is at 5%.

With wheat purchases still on in Rajasthan, the government total procurement of the food grain for the current marketing year ending March, has touched 30.8 million tonne, up 34.1%. The government wheat procurement has ended in the major producing states, except Rajasthan, where 1.24 million tonne wheat has been procured so far, up 62.8% from a year ago.

Wheat prices were down in key wholesale markets of the country due to subdued buying ahead of rollout of goods and services tax on Jul 1. In the key Delhi market, mill quality wheat sold down 20 rupees from the previous day and in Kota, the grain was sold down 10 rupees from previous close. The July contract ended down 0.4% from previous close.

USDA showed crop conditions that were below expectations yet again. Spring wheat continued to see eroding scores hitting 40%, below expectations of 41% which was the reading last week.

European wheat prices fell, pressured by good harvest results in France and as the euro rise against the dollar hampered the competitiveness of European wheat on world markets. Front month September on the Paris-based Euronext exchange was down 0.1 percent or 0.25 euro at 171.00 euros a tonne. It had surged during a heatwave in France last week, which raised concern of damage to crops.