The Longest Losing Streak in 2021
U.S. wheat futures faced a downhill trajectory for the fifth consecutive session, marking the longest losing streak of the year. The descent was triggered by the U.S. Department of Agriculture’s revelation that the domestic winter wheat harvest was 6% complete. This figure exceeded analyst predictions of 4% and surpassed the five-year average of 3%.
Optimistic Crop Ratings
The USDA’s latest Crop Progress report further fueled the decline as it unveiled that spring wheat planting was 94% complete, topping the five-year average of 90%. The report also highlighted positive ratings, with 74% of spring wheat and 49% of winter wheat deemed in good-or-excellent condition. These figures reflected notable improvements compared to the previous year.
Market Commentary and Concerns
Market observers, however, expressed apprehension regarding the absence of substantial supportive data for enhancing existing futures prices. Doug Bergman of RCM Alternatives pointed out the lack of a weather premium injection into the market, a phenomenon typically seen in June. Despite historical trends, uncertainties loomed as Bergman cautioned against premature optimism.
Frontier Futures broker Joe Nussmeier articulated the market’s dilemma, stating, “We’re finally seeing harvest pressure hit the market.” He further emphasized the challenge posed by limited avenues for offloading the surplus wheat. Nussmeier underscored the bleak demand scenarios, signaling turbulent times ahead for wheat futures.
Price Movements
On the commodity front, CBOT wheat for July delivery registered a decline of -2.2% to $6.58 1/4 per bushel. Concurrently, July soybeans and corn also witnessed reductions of -0.4% and -0.3%, respectively. The negative price trend indicated the prevailing market sentiment of caution and uncertainty.
External Factors Influence Market Behavior
Adding to the market pressure, sliding crude oil prices exerted additional strain on CBOT grains. Analysts at AgriTel noted a continued divestment by funds from wheat, corn, and soybeans in response to this external influence. The interplay of oil and grain markets is further underscored by the growing prominence of renewable fuels like ethanol and soybean oil in the energy sector.
Reflecting on Past Volatility
The recent struggles in wheat prices starkly contrasted with the previous month’s performance. In May, wheat prices experienced a significant surge, marking the largest monthly gain in two years. This surge was attributable to adverse weather conditions affecting the crop in Russia, the world’s leading exporter.