CBOT markets have had a positive day today almost from the off, and that is in spite of reportedly better planting conditions in S America. US winter wheat condition lost 1 percentage point from last week (good to excellent) which is a record low and Australian wheat has an elevated quality risk as a result of unseasonal rainfall . We also continue to hear additional news of crop development pressure in parts of Russia and Ukraine as summer drought conditions continue into the autumn and early winter leaving wheat vulnerable should winter conditions prove to be extreme. The drop in US wheat condition comes on the back of the worst recorded summer drought since 1956 and also at a time when global supplies are under extreme pressure.

London wheat hit new highs again today with the May ’13 contract hitting £225.00 and closing just £0.25 off that level. New crop conditions fare little better as autumn sowing conditions continue to delay planting of cereal crops in both the UK and northern Europe, France in particular. Paris wheat also made new contract highs and technical levels are being tested which, if broken, could pave the way for new all-time high prices. We reiterate our view that US wheat is now looking cheap in relation to other origins.

We now look forward to Friday’s USDA report which is widely anticipated to present a bearish soybean output estimate but could well hold a “sting in the tail” for grains with reduced wheat output in both Australia and Argentina. In addition reduced US and world grain numbers would not be ruled out in the report.