The market seems to have done all of the grinding lower for the time
being. Northern Hemisphere crops all
appear to be in relatively good shape, Australian harvest is done and dusted
and South American crops, while dented, have stabilised ahead of harvest.
Over the next three to four months, the market will try to determine
what is going to ‘kill’ this season’s crop and price in risk accordingly. Traditionally, these
are the opportunities to watch for if making decisions on forward sales.
Russian winter wheat appears to have dodged the severe cold due to a
good protective cover of snow throughout the regions. SovEcon reports the crop
could reach 92mmt with exports in the order of 45-50mmt. This will likely make
Russian origin wheat the pacemaker for cash values into the next marketing year. In other words, status quo.
Ukrainian wheat exports have grown throughout the year after an
alternative grain corridor was established. This sea link will quickly help
re-establish Ukraine as a major exporter assuming it does not become a Russian
military casualty.
I suspect the greatest chance of a rally will be weather induced. The El Niño weather phenom is expected to give way to the La Niña
weather pattern according to some models. History shows this pattern is beneficial for
Australia and SE Asia, but detrimental for South America and parts of the US.
Should this weather pattern become entrenched –
and depending on its severity – I think we can expect to see weather
dominate the market moves.
Of course, politics will get a good run on the bingo card with the
Black Sea still far from being resolved and the flash point in the Red Sea a
sign that the conflict in Israel is spreading beyond its borders. The impact on
global inflation cannot be underestimated at a time where demand is already suffering due to tight economic
conditions.
China remains in the background steadily chipping away at purchases. They have bought 99mmt of soybeans this 2023 calendar year, 70mmt from
Brazil and the remainder from the US (down 13% year on year). Corn imports are
also up 30% year on year at 27mmt, which flies in the face of a recent Chinese
Ag Ministry statement that Chinese production was better than expected. Wheat
imports of 12mmt are above the expected quota of 10mmt. Does Chinese demand
remain strong? There are some doubts as the pig herd has shrunk recently,
putting a cap on potential demand in the short term.
Wheat in the eye of the storm
Data sources: USDA, Reuters, SovEcon, Mecardo
Categories
Weather bingo card
After the relatively quiet last few months where the ag commodity markets have drift-ed lower, the establishment of the weather market has seen a welcome
Getting good prices while avoiding volatility
Grain and oilseed markets are showing some good old-fashioned spring (in the northern hemisphere) volatility. We know that springtime dryness can grow into real production
Time to cut the BOM some slack
Another week, another very mixed result. Last week, Middle Eastern politics drew the market’s attention, this week it’s all about the weather. Russia looked to
Moving in the right direction
The worm seems to have turned somewhat in the grain and oilseed complex. While there is some short-term support coming from yet more geopolitical unrest,
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