US crop condition report adding to supply concerns: Grain market daily

• Yesterday’s old crop (May-22) UK feed wheat futures saw an increase of £9.20/t on Friday’s closed to £361.00/t. Meanwhile, new crop futures (Nov-22) closed at £352.00/t, a gain of £15.70/t from the end of last week. Both domestic old and new crops were contract highs.
• High wheat prices are likely driven by the wheat export ban imposed by India, tightening global supply and the downward revision to US crop conditions.
• Further tightening of supply could be felt after Morocco's Ministry of Agriculture announced on Friday that the country is expecting a poor harvest due to their recent drought. The USDA predicted last Thursday that new crop wheat production is estimated at 2.25Mt, down over 70% from 2021/22.
• Paris rapeseed futures price (Aug-22) jumped £9.00/t from Friday’s closed to £879.50/t. The Nov-22 contract prices saw a similar increase of £8.75/t, closing at £866.25/t.

New crop wheat futures hit contract highs yesterday, with Monday’s USDA crop progress report adding to supply worries that have been increasingly growing in recent weeks.

For the week ending 15 May, just 27% of the US winter wheat crop was rated good-excellent. This was back 2 percentage points on the week, falling below trade expectations. This move continues the trend of diminishing crop conditions reported for the US since spring reporting began last month.

We must look back to harvest 2014 for the last time, at this point, the US reported a greater proportion of its winter wheat crop as poor-very poor, than good-excellent.

Monday’s crop report further compounded the tightening supply prospect. Last week’s USDA World Agricultural Supply and Demand Estimate (WASDE) report, forecast a tight outlook for next season. The downgrading of production prospects from Australia, Ukraine and Morocco more than outweighed increases estimated in Russia, Ukraine and the US. However, the latest crop progress report leads to increasing fears as to how much of the US forecast production uptick will be realised.

How will this affect the UK price?

These concerns fed through into new crop prices. Chicago (Dec-22), Paris (Dec-22) and UK (Nov-22) wheat futures all hit contract highs on Monday, although have settled back a little during the course of today.

With the global supply situation tight for both old and new crop, and the UK a net importer of wheat this season, UK feed wheat prices are linking very closely to global price movements. Any global volatility, both up and down, will feed directly though into UK prices.

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