Wednesday’s USDA report reversed the negative trends in the wheat market.
Oilseed markets were also reignited following the report.
In the UK, analysts are still closely following global trends.
Nov-21 LIFFE wheat futures closed on Wednesday March 31 at £164.50/tonne, a fall of £0.90/t on the week.
Wheat prices in Europe have come under pressure in recent weeks with old crop wheat experiencing five consecutive weeks of losses having reached lofty heights on the back of global price support, particularly coming from corn.
The picture is improving for new crop with domestic and European conditions improving and spring work making good progress.
Speculative investors have continued to reduce the number of long contracts held in Chicago wheat, as managed money now holds the smallest number held this year. Managed Money has also increased the number of short positions held.
The reduced bullish stance from speculative investors is a reflection of the improving conditions and outlook for next season.
As covered in the latest Global Grain Outlook, The International Grains Council (IGC) is estimating Russian wheat production at 76.9 million tonnes, which while down year on year, is still larger than in 2019/20. In the EU, production estimates for 2021/22 remain modest at 136.8mt, but still up from 124.4mt in 2020/21.
Crop condition across Europe and the Black Sea will be key to watch over coming weeks as crops enter key production phases.
The markets had been drifting south over the week as buyers seemed in short supply and weather conditions globally seemed to remain positive for crop development and spring plantings.
Wednesday evening's US stock and intentional planting numbers then reversed all of that negativity. The wheat stocks and planting intentions were more in line with trade estimates, but the soya stocks and corn area came up much shorter than expectation.
The markets reacted on the upside and the question now is how much can price influence US farmers current intentions between now and drilling?
If the world needs corn and soybeans, the acres need planting, or the demand needs curbing and price will influence both along, with mother nature.
A smaller planted area with no weather conditions is a dream scenario but markets need confidence in order to take the steam out of values and confidence comes with larger acres that can withstand weather issues.
The markets will now remain nervous and more volatile until more is known with regard to final US plantings and also as we see how the Russian tax situation really functions.
This coming season could leave consumers buying hand to mouth, which coupled with a volatile freight market could just be the right solution.
European wheat futures markets extended their downward trend earlier this week, with prices falling to levels not seen since December.
A lack of fresh old crop demand combined with improving 2021 wheat production prospects for the Northern Hemisphere has continued to weigh on prices. Black Sea markets were particularly weak with Ukraine export offers just above $250/t.
However, the USDA published its quarterly US stock and acreage report on Wednesday March 31, outlining US 2021 wheat planting intentions and providing updated US stocks figures.
On the back of the report, Paris matif prices closed up on Wednesday.
The report was particularly bullish for US corn, triggering a sharp rally for Chicago Board of Trade (CBOT) corn futures, taking them to contract highs not seen since 2013. Despite the report having bearish wheat data, wheat futures followed corn futures higher, which ended the recent slide in prices.
Prior to the report, private analysts predicted US farmers might plant as much as 94m acres of corn. However, the USDA estimate was more conservative at only 91.144m acres.
Using trend line yield data, this would leave 2021 US production short of expected domestic and export demand, cutting stocks and leaving a bullish outlook.
US quarterly corn stocks estimates were also bullish, seen at 7.701 billion bushels below average trade estimates and down 3% on the year.
The USDA now sees a larger US wheat area than previously predicted, with the additional acres primarily in winter wheat. In its Outlook Forum in February, the USDA had estimated a wheat area of 45m acres.
This has been revised to 46.358m acres in the report; a total wheat area that is more than 2m acres greater than last year. At 1.314bn bushels, wheat stocks were 7% down on last year.
US planting estimates for 2021 released by USDA on Wednesday were lower than expected for corn and soybeans, reigniting bullish sentiment after recent significant liquidation.
Some markets went straight to limit up. CBOT soybeans finished 70 cents up on the May contract, up 72 cents from the low and equal to the high, with July soybeans showing a near-identical picture.
Although ending stocks were higher than trade estimates at 1.564bn bushels, the intended soybean area was particularly disappointing at just 87.6m acres, well below the expected 90.1m acres.
If the weather turns out less than perfect and a record yield is not reached, there could well be problems down the line.
The market will now focus on South American weather developments. Brazil remains dry, allowing soybean harvest progress to return to average, now put at 71% completed, an impressive feat after all the bad weather.
Argentina’s harvest is getting going as more crops ripen, but conditions remain very poor in some areas.
Matif rapeseed saw a late recovery after several sessions lower, rallying to €514 after trading below €500 at the start of the day. August futures also rallied, narrowing the May/August inverse.
In the UK, the euro to pound exchange rate could swing depending on vaccination fortunes.
The UK is coming under more supply pressure, whereas the EU is about to receive much more, hopefully helping some countries towards recovery.