US wheat weakness won’t hit global supply or pricing: Rabobank

Winter wheat conditions in the US have hit five-year lows and the United States Department of Agriculture (USDA) has forecast a crop fall of 9% Year Over Year (YOY) for the 2013/14 season.

Rabobank said the increased concerns for the new season supplies in the US have been underpinned by delayed planting and wet conditions.

“Volatility in the US wheat markets has increased in the past six weeks, and as weather remains the key price mover it is likely to remain elevated for the next four weeks,” ​it said in its May commodities report.

It did however note that the US market had a chance of recovery as corn plantings begin in early June.

Against this, EU wheat production is expected to increase its wheat stocks and there are “plentiful supplies”​ from the Black Sea region, Rabobank said.

“The outlook for European wheat supplies is favourable, and we continue to anticipate that production will increase 7% Year Over Year (YOY), while ending stocks will increase 53% in 2013/14.”​

“…Increases in global wheat supply, notably in the Black Sea region, are likely to weaken prices in the second half of 2013,”​ it said.

US to lose out on exports​

Strengths in other global wheat markets indicate that the US is set to lose out in the export market.

“We view the expectations for lower than expected US wheat exports as high, given the likelihood exports from the Black Sea region, Europe, Australia and even India will win more global market share due to lower prices.”​

Rabobank said the Australian dollar and Brazilian real have fallen against the US dollar by 6% and 2% respectively in the past month – making wheat from origins other than the US appealing.