Wheat Prices
Chicago wheat futures decrease for a fifth consecutive day on Wednesday 10 April, the worst losing streak since February, after a U.S. government report raised its estimate for world wheat inventories.
The most-active wheat contract on the CME was down 0.3 percent at $4.58 a bushel. The five days of losses for the wheat contract are the worst streak of declines since prices dropped for six days in a row from Feb. 25 to March 4.
The wheat market is under pressure after the U.S. Department of Agriculture (USDA) in a monthly report on Tuesday raised its forecast of global 2018/19 wheat ending stocks to 275.61 million tonnes, the highest in a range of trade expectations. The USDA also boosted its estimate of domestic wheat supplies.
Corn Prices
South American bids were down, reflecting abundant exportable supplies. Argentine bids fell $3/ton to $159, while Brazilian bids, reflecting improved prospects for second-crop corn, were down $25/ton to $165. Black Sea bids rose $2/ton to $174 on stronger demand from the European Union. U.S. bids fell only $3/ton to $170 as larger- than-expected planting intentions were mostly offset by concerns over planting delays and weather-related river logistics complications.
Prospective Plantings in the US:
Corn planted area for all purposes in 2019 is estimated at 92.8 million acres, up 4 percent or 3.66 million acres from last year.
All wheat planted area for 2019 is estimated at 45.8 million acres, down 4 percent from 2018. This represents the lowest all wheat planted area on record since records began in 1919. Winter wheat (HRW, SRW, and White Winter) is down 3 percent from last year.
Area planted to other spring wheat for 2019 is estimated at 12.8 million acres, down 3 percent from 2018. Of this total, about 12.4 million acres are Hard Red Spring wheat. Durum planted area for 2019 is estimated at 1.42 million acres, down 31 percent from the previous year.
Problem in the US due to the USDA report and Weather
USDA (U.S department of agriculture) report of the month of April has highly impacted the future price of corn and wheat. Indeed, an increase is forecasted in U.S corn ending stocks. Indeed, the USDA reported that the amount left over of corn for the end of the 2018/19 marketing year was 1.835 billion which is historically high. More supply means that the price of corn will go down.
Moreover, Corn is also threatened by terrible weather condition into the southern fringes of the crop belt. Even more alarming, the US farmer have started to plant the 2019 corn and wheat crops. The current snowstorm will have some impact as it might kill the crop that are really fragile currently. 15 to 30 cm of snow are forecasted in the area of South Dakota, Nebraska, Iowa, Minnesota and Wisconsin. This is also combined by the recent flooding disaster that happened recently in the US.
Figure 1: Corn Belt
Figure 2: Wheat Belt
Trading houses reaction to the hard times of soft commodities
From the trader point of view, it appears that soft commodities are not as profitable as it used to be. It is mostly due to the US – China Trade war and the weakened the amount of shipment between the 2 countries. The profit of ADM has been reduced from the food industry. For ADM the food segment an operating profit of $339 million in 2018, compared to $546 million for 2017, (includes grain handling). The solution found by ADM is to force early retirement among many employees of the enterprises such as traders and operators to improve the productivity.
Future prices
Figure 3: $/bushel
Figure 4: $/bushel
Bibliography:
https://af.reuters.com/article/commoditiesNews/idAFL8N21Q5EC
https://www.reuters.com/article/us-archer-daniels-workers/u-s-grain-trader-adm-says-to-seek-early-retirements-may-cut-jobs-idUSKCN1RM2MF
http://marketqview.com/forwardcurvechart.php?ID=19&TYPE=Price