The price roller coaster continues between strong supports (low stocks) and strong resistances (demand rationing). Consequently any price downside remains limited and a potential bullish scenario is still on the table. Harvest definitive results and North American weather will dictate the 2021 price orientation between now and the end of August.
Winter crops harvest is now well underway in Europe and the Black Sea. It will take time to fully assess both quality and yields as the ongoing hectic weather conditions during both the growing season and now during harvest are producing very mixed results.
What we know as of today: with 25% of the crop harvested, Russian winter wheat yields are disappointing (the worst in 5 years), Ukrainian yields are good, but quality is at risk, Romanian harvest is record with good quality and France is very mixed so far. In the UK some farmers inform us of potential bad surprises between fields looking great and real yield performance. Disease pressure is strong, bushel weight is at risk. Universally, harvest is 10 days delayed all over Northern Europe.
Simultaneously, spring crops are still very much at risk in North America. If a large part of the US corn belt is still in very decent condition, the North and Northwest regions are problematic. The impact on corn and soya could be limited although global yields will not be a record. However spring wheat production potential is very badly hit, certainly the worst harvest in 35 years! As a result, US wheat futures hit a two-month high yesterday. Canada is facing similar dry and warm conditions, increasing the risk for wheat and canola production.
All in all, uncertainty prevails. Harvest pressure will certainly set a roof to current high prices and low grain and oilseed stocks will set a floor to any price drop. In term of risk management, we will need to be agile, selling the highs of the trading range and holding on the lows. Yet let’s wait for yields and quality to be secured as uncertainty prevails here too.