Headlines:

  • Aussie wheat prices rise. amid ‘record’ Western Australia dryness
    As fears ease over dryness threatening the northern US Plains wheat, concerns are growing over Australia’s newly-seeded crop, with an “exciting week for prices”, amid talk of record dryness in Western Australia. In Australia, new crop Sydney wheat futures for January delivery touched Aus$265 a tonne on Wednesday, the contract’s highest in a year, reflecting domestic concerns as well as the lift given to international prices by the drought in the US spring wheat belt. In Western Australia, Australia’s top wheat-growing state, “soil moisture is currently record low”, according to crop analysis group Lanworth, which said that levels were also “below average in South Australia, New South Wales and Queensland”. The group added that weather forecasts “call for little or no rainfall next week and trace amount of precipitation in the last week of June, with relatively warm temperatures. “The warm and dry pattern will worsen soil moisture deficits.”
  • Central American coffee loses premium, despite fresh disease fears
    Prices of so-called “other mild” arabica coffee, produced in the main in Central America, extended their discount to Colombian mild beans to the highest in years, despite worries over a fresh disease outbreak in Honduras. The price of other mild beans – grown mainly in the likes of Guatemala, Mexico and Honduras, but also in southern Africa and some Caribbean islands – extended their recent decline to hit 144.80 cents a pound on Wednesday, according to the International Coffee Organization. The drop expanded to 3.16 cents a pound their discount to mild arabica beans produced in Colombia which only last month began to regain their premium after a three-year period when the dent to Central American supplies from the outbreak of the coffee rust, or roya, fungus gave values of other milds the upper hand. In March last year, Colombian milds fell to a discount of more than 12 cents a pound.

 

Summary:

Early in the week the Spring Wheat crop led the Grain markets higher. The energy fizzled yesterday but Winter Wheat took over the reins today causing rally in the grain complex. The December Winter Wheat contract posted the highest close since March 8th. The combination of concern over setbacks to the crop because of weather along with fund buying and short covering sent Wheat on a ride that finished at the highs of the day. The Chicago Wheat is not really seen as being in danger of weather losses but its rise today is perceived as evidence of speculators using the contract as a means participating in what is being touted as a potential broader recovery in Wheat prices.

Given the recent softness in US equities, investors could very well be moving out of equities moving into commodities. Weather concern outside the US also added fuel to the fire because of the potential for erosion of the European Union and Ukraine crops.