Rains Hammering U.S. Wheat Bode Well for Rival Grain Shippers

Rains-Hammering-US-Wheat-Bode-Well-for-Rival-Grain-Shippers-4187.jpg      Rains Hammering U.S. Wheat Bode Well for Rival Grain Shippers

Relentless rains over the American grain belt may herald good news for wheat shippers across the Atlantic.

U.S. wheat export prices have rallied since mid-May as a deluge of rain threatens crop quality and roils corn plantings. That’s helped to solidify the Black Sea region’s return as the world’s cheapest origin, and favorable weather in Europe has also kept the bloc’s price rally more muted.

Winter grains harvest kicks off soon in the Northern Hemisphere and Russia is expected to continue its dominance of wheat exports for a third straight season. Analysts forecast a bumper harvest and Russia’s grain will soon take “center stage in pricing,” Rabobank said in a report this week.

“The Black Sea is in a good spot,” with demand likely to pick up after buyers return from the Ramadan holidays, said Matt Ammermann, commodity risk manager at INTL FCStone.

The extent of shifting demand may not be realized until later this summer, as importing nations nearer the equator wrap up local harvests, said Ben Buckner, an analyst at AgResource. Sales of U.S. wheat for the coming season are running 39% above last year after an earlier price rout, government data show.

Though the weather could shift before harvest, Russia’s low prices and bigger crop have the potential to accelerate exports once the next season starts in July. ProZerno sees shipments rising to 40 million tons, up from 35.5 million in the current year. A run-up in domestic costs after last year’s smaller crop had spurred worries earlier this season that the country may curb exports.

The U.S. storms also pose a risk to wheat quality as harvest approaches. Parts of Kansas and Oklahoma faced quadruple the amount of normal rains in the past 30 days, increasing risks of lower protein content or infections from fungi and mycotoxins, Rabobank said. The USDA earlier in May forecast domestic output little changed this year.

Milling wheat futures traded in Paris have climbed about 8% in May, versus a 19% gain for benchmark futures in Chicago.

“The U.S. origin may well be non-competitive on the international scene for the upcoming campaign,” Paris-based adviser Agritel said Wednesday in a note.
Source: Bloomberg

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