- When you think about the price of protein wheat, it’s just plain cheap! The chart below reflects HRS wheat futures dating back to 1992 and notice that last year’s fall to $3.85 spot futures tested a monthly uptrend line that extended back to 2002. If this trend line holds, it means that July or September MGE wheat could test $4.94-5.00, but amid a potential shortage of US protein wheat, we doubt that there is much additional downside price risk. In addition, with crop damage befalling the US HRW wheat crop it would seem that there is not much to be made of being bearish wheat!
- Today has seen higher grain prices in Chicago, and this has pushed through into EU prices in both Paris and London. Soybeans are currently trading around unchanged. Short covering in the grains has been the order of the day. Egypt’s latest wheat tender saw a massive 295,000 mt purchase with supplies being secured from Romania, Ukraine, Russia and the USA for mid to late June shipment. The lowest priced offer was for US HRW (basis fob) at $185/mt, highlighting the competitiveness of this origin on the latest price break. Seemingly, lower protein HRW prices basis US Gulf are also declining. Also of interest is the fact that Russia’s 240,000 mt offered price levels at $198-205/mt suggest that recent offers (well below these levels) were somewhat underpriced and questions over Russian physical availability bear asking. The US competitive position, despite freight disadvantage, is not in dispute, and prices are reacting higher as a consequence.
- Our view is that we are at a point where it would be foolish to be bearish agri commodities today. US wheat is competitive, particularly (and importantly) with Black Sea and EU supplies through to mid-summer.