Potentially explosive fundamentals have unfolded since the Northern Hemisphere crop was planted:
1. It is the drought in the Ukraine and Russia that should be making headlines. They have had less than half rainfall amounts they would have normally recorded for this time of the year. Same goes for Germany across to Poland. If the Ukraine and Russia have a drought affected harvest thrown into the current political mess, it would not surprising to see export restrictions placed. 2. China has had a dry winter. This makes my mouth water because a Chinese wheat deficit directs them straight into the Western Australian market and drives strong basis. The basis is still very strong at around $30/t at the moment for the currently unplanted Aussie crop. That's pretty unusual for this time of the year. 3. The US crop is mixed but far from set up for even an average year. The southern plains are parched having recorded 30-50% of historic levels for this time of the year. The world is going to need to see generous spring/summer rainfall to salvage potential. We haven't a clue about winterkill but the US and Canada have recorded on of their coldest winters in decades. 4. Australia has negligable subsoil rainfall but the 7-14 day forecast has a good event predicted for the East Coast which would be welcome subsoil for the upcoming winter crop. 25-50mm possible for NSW and Qld. 5. India has a record crop which anyone can buy if they like weevils and heshion bags. Seriously does anybody think any grain in volume can paddle back up the infrastructure supply chain that is usually importing grain into this country. Analysts are so academic. These are bulk commodities and you can't just move them if there is no infrastructure. Imagine the prospectus. Invest in Indian export infrastructure which may get used once or twice in a 20 year period. 6. Producers smell blood and so the basis will need to remain strong to encourage edible sales not paper shorts.
