Wheat

Wheat prices are likely to be confined to a narrow range in the coming days as the government has huge inventory of the food grain in its central pool. The government had 40.9 mln tn of wheat inventory in its central pool as on Aug 1, higher from 30.1 mln tn on the same day last year. The government has also raised its estimate for wheat output in 2017-18 (Jul-Jun) to a record high 99.70 mln tn from 98.61 mln tn earlier.

Wheat futures on NCDEX also edged higher amid absence of cues from key spot markets that were shut on account of Janmashtami. On NCDEX, the September-delivery wheat futures closed at 2,016 rupees per 100 kg, up 12 rupees. Wheat prices are likely to be confined to a narrow range in the coming days as the government has huge inventory of the food grain in its central pool. The government has also raised its estimate for wheat output in 2017-18 to a record high 99.70 mln tn from 98.61 mln tn earlier.

European wheat rose on concerns about availability on the world market with lower than expected supplies in the European Union and Canada and uncertainty on export policies in the Black Sea region. Benchmark December milling wheat on Paris-based Euronext, settled up 1.9 percent at 205.50 euros a tonne. European wheat gained 2.75 euros this week and 1.25 euros over the whole month of August which was marked by volatility with prices moving in a 198.00 to 219.25 euro a tonne range. The low euro against the dollar which remains below the $1.17 resistance is also supportive for European wheat, making it more competitive on the world markets.

The European Commission slashed its monthly forecast of common wheat exports from the European Union in the 2018/2019 season, due partly to a cut in its output estimate, in a further sign of tight world wheat supplies. In supply and demand forecasts released, the Commission pegged EU common wheat exports this season at 20.0 million tonnes, down from 25.5 million estimated in July and now below the 21.3 million shipped last season. The Commission cut its estimate of EU common wheat output to 128.8 million tonnes from the 133.5 million estimated in July and 142.0 million harvested last year. European wheat crops have suffered from hot and dry weather this season, particularly in the northern part of the bloc, with Germany losing nearly 20 percent of its crop.

Russian wheat exports between the start of the season on July 1and August 29 were 8.17 million mt, up 60% on the year. Higher-than-usual temperatures and dry weather over May-June resulted in an earlier-than-usual harvest and exports. Meanwhile, this weather also hit production. Rain during the harvest, especially in central regions reduced the quality. Russian wheat production for this marketing year is expected to be about 68 million-70 million mt, down from a record high of 85 million mt last marketing year. Wheat production is also expected to be lower in other producing regions, notably the EU, Canada and Australia, supporting wheat prices and incentivizing producers to take advantage by exporting. Deep sea port 12.5% protein wheat prompt loading was assessed at $225/mt Friday compared with $180.50/mt a year earlier, but $1.75 lower on the week and off the 42-month high of $234.50/mt hit on August 8.

Food Corp of India sold 87,750 tn of wheat in the sixth round of auctions under the open market sales scheme for 2018-19 (Apr-Mar). The state-run agency had offered 2 mln tn of the grain at the auction. Food Corp of India holds wheat auctions for sale under the open market scheme, where bulk buyers like flour mills and bakery product manufacturers usually purchase. In Punjab and Haryana, most of the quantity was sold around the base rate of 1,900 rupees per 100 kg. In Madhya Pradesh, it was sold at 1,925 rupees. The agency had sold 95,450 tn of wheat in the fifth round of auctions that was held on Aug 16. For Jul-Sep, the government has fixed the base price for selling wheat under the open market sales scheme at 1,900 rupees per 100 kg. In wheat-producing states such as Punjab, Haryana and Madhya Pradesh, the government holds auctions at the base price. In states that don’t produce wheat, an additional price equivalent to ex-Ludhiana freight is added to the base price. From this year, the government has decided to change its base price for wheat offered under the open market scheme on a quarterly basis, to factor in carrying costs. For Oct-Dec, the base price has been set at 1,925 rupees per 100 kg, and would increase by 25 rupees to 1,950 rupees per 100 kg.

Food Corp of India sold 95,450 tn of wheat in the fifth round of auctions under the open market sales scheme for 2018-19 (Apr-Mar). The state-run agency had offered 2.2 mln tn of the food grain in the auction. Food Corp of India holds auction of wheat for sale under the open market sale scheme, where bulk buyers like flour mills, bakery product manufacturing companies usually purchase. In Punjab and Haryana, most of the quantity was sold at 1,900 rupees per 100 kg in. In Madhya Pradesh, it was sold at 1,912 rupees. In Punjab, Haryana and Madhya Pradesh, response to the wheat auction has higher from the last round of tenders. The agency had sold 95,150 tn of wheat in the fourth round of auctions that was held on Aug 9.

The International Grains Council has lowered its estimate for global wheat production for 2018-19 to 721.0 mln tn from 736.8 mln tn seen in its previous report. A record 758.1 mln tn wheat was produced globally in 2017-18. The forecast for 2018-19 has been slashed mainly because output in Russia, Ukraine, China, European Union and Australia is seen falling. Unfavourable weather conditions in key wheat growing regions of the world is expected to lead to a decline in output. Following a reduction in output projection, global wheat inventory in 2018-19 is also seen down at 247.2 mln tn from 255.6 mln tn forecast earlier. The agency has slashed its estimate for global wheat imports in 2018-19 marginally to 176.0 mln tn from 176.5 mln tn seen earlier. India’s wheat imports in 2018-19 are seen at 900,000 tn, unchanged from the projection made in July. It also maintained the country’s wheat output estimate for 2018-19 at 95.5 mln tn. The agency had estimated the country’s wheat production in 2017-18 at 98.5 mln tn.

Deep sea port Russian 12.5% protein wheat market participants expect buyers to return to the market at $225/mt as market prices fall in an attempt to tempt buyers back. Destination demand has slowed considerably in the last few weeks as buyers balked at surging costs, preferring to dip into their stockpiles. The softer fundamentals were also reflected by S&P Global Platts 12.5% protein wheat assessment. Prompt-loading was assessed at $228.25/mt, down $6 on the week but still clinging onto its 41-month high.

Bangladesh will import around 6.5 million mt of wheat in the next marketing year.

The wheat harvest has started and it could be a record year for North Dakota farmers. Rain in June, the heat in July and warm weather recently are contributing to a great yield. It’s allowing farmers to get out into the fields and start harvesting the more than 7 million acres of wheat planted this spring.

Asian and Middle East countries were the leading buyers of Ukrainian wheat in July, the first month of the new 2018/19 season. Ukraine is among the world’s major wheat exporters and sold a total of 17.2 million tonnes of wheat abroad in the previous 2017/18 season. n July, Ukraine exported a total of 959,960 tonnes of wheat. The data showed that Ukraine exported 103,973 tonnes of wheat to Israel, the leading importer of Ukrainian wheat last month. It also exported 90,650 tonnes of wheat to Philippines, 74,957 tonnes to Egypt and 63,070 to Italy.

Egypt purchased 420 KMT of milling wheat from Russia & Romania to be delivered on September 21 – 30 and October 1-10, 2018 at an average price of USD 249.76/MT C&F. The price in the previous tender equaled USD 253.31/MT C&F.

Jordan’s state grains buyer JSSGC continued its three-week wheat buying spree as it picked up 60,000 mt of milling wheat.

Rains over the last 24-hours are helping to build up soil moisture ahead of winter wheat planting. Estimates are running 200,000-500,000 MT for 18/19 all wheat export sales in the week that ended on August 9. US SRW FOB prices are now below Russia, though they do benefit from cheaper freight prices into the eastern Mediterranean.

Spot prices of wheat edged slightly higher in key markets of Delhi and Kota due to improvement in demand from bulk buyers. In Delhi, spot prices of mill-quality wheat were at 1,970-1,980 rupees per 100 kg. Price of mill-quality wheat in the Kota, a key market, was at 1,840-1,880 rupees per 100 kg, up from 1,850-1,870 rupees on previous close. Prices edged higher in Kota also because of a fall in daily arrivals. Daily supply of wheat is down because the government procured the food grain aggressively this year. The government procured 35.5 mln tn of wheat in 2018-19 (Apr-Mar), against 30.8 mln tn in the previous year. On NCDEX, the front-month August contract of wheat moved in a narrow range and ended at 1,972 rupees per 100 kg, down 0.3% from the previous close.

Russian wheat exports between the start of the marketing year on July 1 and August 8 were 4.63 million mt, up 90% on the year. The faster pace than last year reflects an earlier-than-usual harvest as a result of hot, dry weather, which prompted farmers to begin much earlier than expected to minimize heat and drought damage to crops. Despite this, crop production forecasts are much lower at around 70 million mt for 2018-19 than 2017-18s 85 million mt harvest. Supply constraints have subsequently pushed prices to record highs. Deep sea port 12.5% protein wheat was assessed by S&P Global Platts at a 41-month high of $231.50/mt. The forecast for Russian production was revised up 1 million mt to 68 million mt. Exports too were revised up 1 million mt to 35 million mt but still well short of the 42 million mt exported in 2017-18.

China sells 1,303 tonnes of imported 2013 wheat at auction of state reserves at an average price of 2,351 yuan ($341.79) per tonne. Sale represents 0.07 percent of total wheat available at the auction. China also sells 2,070 tonnes of 2012 wheat at auction of state reserves at an average price of 2,360 yuan per tonne, according to the trade center. The sales volume represents 1.93 percent of total wheat available at the auction.

The outlook for 2018/19 U.S. wheat this month is lower supplies, greater use, and reduced stocks. Wheat production is lowered 4 million bushels to 1,877 million on a slight reduction in winter wheat and durum production as indicated by the NASS August Crop Production report. Projected food use is increased by 5 million bushels to 970 million based on the latest NASS Flour Milling Products report. This would be record food use, surpassing 2017/18, which was also revised higher. Projected wheat exports are raised 50 million bushels to 1,025 million on substantially lower exportable supplies for the EU and limited additional export capacity of several other major competitors. Projected 2018/19 ending stocks are reduced 50 million bushels to 935 million, down 15 percent from last year. The projected season-average farm price is up $0.10 per bushel at the midpoint with the range at $4.60 to $5.60. World 2018/19 wheat supplies are reduced this month by 7.1 million tons, primarily on lower EU production. Continued drought conditions in several northern European countries, most notably Germany, resulted in lower production, down 7.5 million tons to 137.5 million. This would be the lowest EU wheat production since 2012/13. Russia’s wheat production is increased 1.0 million tons to 68.0 million on continued favorable conditions for spring wheat. Projected global 2018/19 trade is lower, mainly on reduced EU exports, which are down 4.5 million tons to 23.0 million, the lowest in six years. Russia’s exports are increased 1.0 million tons to 35.0 million; Russia is projected to remain the leading world wheat exporter for the second consecutive year. Global imports are lowered for several countries with the largest reduction for Algeria. Projected 2018/19 world consumption is 5.1 million tons lower, primarily on reduced feed use in the EU and Russia. Global ending stocks are down 1.9 million tons to 259.0 million, down 5 percent from last year’s record.