Overseas wheat markets are providing little for North American wheat markets to rally around. As seen on the attached continuous active chart of the Paris milling wheat contract, the price has fallen from a 2019 high of EUR207.25/metric ton to Wednesday's close of EUR169.75/mt, a EUR37.50 or 18% drop.
USDA recent forecasts act as a reminder of the bearishness of the global market, with global ending stocks forecast to rise by 10 million metric tons to 285.4 mmt, or a bearish 37.6% of annual use.
Despite the slide in the future, along with a corresponding slide in the value of the euro against the U.S. dollar, making European exports cheaper relative to competing product, supplies from Russia, Romania and Ukraine continue to rule in tenders such as last week's Egyptian tender. European wheat has not been bought by Egypt since February, according to Dow Jones, despite hopes that it will soon be competitive in price, as there is a lot of it. In August, the USDA estimated the E.U.'s production at 150 million metric tons, up 9.6% or 13.14 mmt from 2018-19.
As seen on the attached chart, this week's low of EUR169 on the December chart is only 2 euros away from a test of the May 2019 low, while the next area of support is in the EUR162-to-164.50 range, a series of eight weekly lows in March/April 2018. Failing this, the next test is the EUR154 low reached in January 2018.
As seen on the lower study, the Dec 2019/March 2020 spread has weakened to minus EUR4 this week, the weakest spread seen since April when this spread reached EUR4.25, a sign of growing commercial bearishness.
Cliff Jamieson can be reached at email@example.com
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