Wheat commentary: HRW/SRW spread widens as drought continues

With little in the way of new fundamentals to trade, talk of drought in the US remained the main topic of the day, but it was not enough to halt futures falling off on a stronger dollar and profit taking.

The USDA’s drought monitor has large swathes of Texas, Oklahoma and Kansas now marked as suffering “extreme drought”, with the area under “severe drought” increasing over the course of the week too.

The narrative looks set to linger in the market over the coming week and provide price support for HRW, with only limited rain forecast for the Southern Plains.

The spread between Chicago and Kansas widened again Friday, with SRW down 0.8% for March and May by 1800 in London, while March HRW remained unchanged and May was down 0.1%.

The European market saw the Matif March contract 0.3% lower and May down 0.2%.

The cash market in Australia saw APW bids inland dropped AUD 1 again overnight to AUD 281/mt, but with the Australian dollar recovering some ground against the US dollar, Agricensus was $1 higher at $241.50/mt FOB Western Australia.

The Black Sea saw prices up $1.25 to $204/mt FOB Novorossiysk on the back of a stronger ruble, while Ukrainian feed wheat prices dropped $1.50 to $185.25/mt FOB Ukraine on a weaker hryvnia.

In Argentina, 100,000 mt of wheat export licences were issued to Nidera, taking total loadings out of the country to 272,089 mt for the week.

Offer prices for 12% Argentinian wheat were unchanged at $190/mt FOB for March, while buying interest was still seen to be limited.

Nonetheless, the Agricensus assessment was moved up $1.50 to $181.50/mt FOB Up River, in line with a stronger peso.

Confirmation emerged in the market of Iraq’s wheat tender, which closed earlier in the week, with 50,000 mt split between Australia at $293.53/mt, the US at $308.50/mt and $307.88/mt, and Canada at $303.52/mt CFR.