The demand side looks encouraging. On April 11 China embarked on what is reported to be a restocking program and bought 360,000 tonnes of US new-crop wheat, the largest single-day purchase since 2004. A few days later, that was topped up with yet another purchase of 480,000 tonnes. China has been largely self sufficient in wheat in recent years, importing at most three million tonnes in some years and next to nothing in others. Introducing China as a buyer is definitely a bullish factor.
At the moment, there is no compelling reason to buy or sell this market. With the risk of smaller-than-expected Northern Hemisphere crops, we would definitely not trade from the short side, because the market has already priced a good crop. While the weather can improve, there is a low probability of achieving optimum yields. Lack of improvement for winter wheat crops and some steady Chinese buying would spark a price recovery.
Stand aside for now, but follow further development of these factors. A very low-risk buying opportunity in new-crop contract months might present itself (Chart 1).