Weather concerns keep Rabobank bullish on wheat

Drought and winterkill threats to the US crop are driving expectations of a bullish picture for the wheat market, with a weaker dollar and a stronger ruble also contributing to the picture, Rabobank said in a monthly update Tuesday.

“Marginal price strength [is] expected across global wheat futures in the short-term, albeit from near-contract lows,” the report said, offering a target price of $4.70/bu for Chicago SRW and €170/mt for Matif into Q2.

Chicago Q3 was put at $4.60/bu and Q4 at $4.70/bu, while Matif was at €170/mt for Q3 and €173/mt at Q4.

It expects production across the rest of the northern hemisphere to remain largely unharmed by weather threats, with cold weather seen in Russia and Ukraine described as “largely non-threatening.”

Soybean markets are currently finding support from the weather, with Argentina too dry and Brazil too wet.

“Key to price direction will be the impact of the Argentine dryness on soymeal production and, therefore, exports, which are currently forecast at 30 million mt.”

The soybean price forecast was unchanged from last month’s report at $9.90/bu for Q2, $10.05/bu for Q3 and $9.80/bu for Q4.

Rabobank lowered its corn price expectation, with Q2 at $3.70/bu, Q3 at $3.90/bu, and Q4 at $3.70/bu, as it pointed to the need for a “catalyst to break out of the recent trading range.”

Hot and dry conditions in Argentina and a one-million acre reduction in US corn plantings have not being enough to move the market significantly, although the report noted price risk remains “skewed to the upside.”

Rabobank's Argentinian corn production forecast was lowered to 39 million mt, 3 million mt below the USDA’s expectation and 2 million mt below last year’s figure.

As such, the forecast for Argentinian corn exports was lowered 1.5 million mt to 28 million mt, despite the government’s tax incentives.