It has been a relatively benign week in the wheat market. Some of the risk premium that had built up over Middle East concerns has dissipated at the time of writing. This has been most evident in the price of crude oil which briefly peaked at US$92/barrel but has now retraced to US$82/barrel.
The dip in wheat prices has spurred some interest with the usual
suspects issuing import tenders. The US was again reminded of how uncompetitive
it is when over 1mmt was offered up, predominantly from Eastern Europe and the Black Sea for a routine
tender. The rise in the USD against a basket of currencies has made US
commodities more expensive and is seen as hurting their export program.
Last week, the USDA received some flack for overstating the potential
of the Argentinean corn crop. This week, the USDA attache in Argentina has made
the relevant cuts. At 51mmt, the estimate is much closer to the Argentine national analyst’s (CONAB) view the crop is 50mmt. There is a view that this estimate may
be trimmed further as damage caused by insects and an insect bourne disease is
taken into account. These cuts to production are happening at a time of low
global prices for both corn and soy. Combined, export revenue has been cut by $4.5 billion according to the Rosario Grain Exchange.
The cut in corn production was also reflected by the IGC’s release of its April world production report. The report also demonstrated
that the world’s farmers are sowing fewer wheat acres with the value of the crop falling below the cost of
production in some areas but also a switch to higher value crops, particularly in Ukraine.
Russian weather has become decidedly drier in the past month. The key
area to watch is the Southern region, east of the Crimea. This area is critical
as it funnels directly into the export channels on the Black
Sea. While the crop remains in good condition, the recent warm weather and lack
of rain could quickly see estimates reduced were this pattern to continue for
the next month. The high levels of carryover
stock in Russia will shield their export program in
the face of falling production, however, any cuts to production in the Black
Sea will be supportive for prices.
Next week
Weather and geopolitics remain the drivers for price direction. The funds (managed money) remain heavily short/sold and seem reluctant to change their position in CBOT. The same can’t be said in MATIF where the short position is being unwound resulting in rallying Europe-an futures.
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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Argentina dealt a cruel hand
The dip in wheat prices has spurred some interest with the usual suspects issuing import tenders. The US was again reminded of how uncompetitive it is when over 1mmt was offered up, predominantly from Eastern Europe and the Black Sea for a routine tender. The rise in the USD against a basket of currencies has made US commodities more expensive and is seen as hurting their export program.
Last week, the USDA received some flack for overstating the potential of the Argentinean corn crop. This week, the USDA attache in Argentina has made the relevant cuts. At 51mmt, the estimate is much closer to the Argentine national analyst’s (CONAB) view the crop is 50mmt. There is a view that this estimate may be trimmed further as damage caused by insects and an insect bourne disease is taken into account. These cuts to production are happening at a time of low global prices for both corn and soy. Combined, export revenue has been cut by $4.5 billion according to the Rosario Grain Exchange.
The cut in corn production was also reflected by the IGC’s release of its April world production report. The report also demonstrated that the world’s farmers are sowing fewer wheat acres with the value of the crop falling below the cost of production in some areas but also a switch to higher value crops, particularly in Ukraine.
Russian weather has become decidedly drier in the past month. The key area to watch is the Southern region, east of the Crimea. This area is critical as it funnels directly into the export channels on the Black Sea. While the crop remains in good condition, the recent warm weather and lack of rain could quickly see estimates reduced were this pattern to continue for the next month. The high levels of carryover stock in Russia will shield their export program in the face of falling production, however, any cuts to production in the Black Sea will be supportive for prices.
Next week
Weather and geopolitics remain the drivers for price direction. The funds (managed money) remain heavily short/sold and seem reluctant to change their position in CBOT. The same can’t be said in MATIF where the short position is being unwound resulting in rallying Europe-an futures.
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Click on graph to expand
Click on graph to expand
Data sources: USDA, Bloomberg, Refinitiv, SovEcon, IGC, CONAB
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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,
Geopolitics and shorts weather
Amazing the difference a week can make. It all started last Friday morning, with continued escalations in the Middle East. The wheat market jumped 20
Exchange rates helping wheat values
The exchange rate has been in the news lately, with the Australian dollar falling to a six-month low last week. Given this, we thought it
Argentina dealt a cruel hand
It has been a relatively benign week in the wheat market. Some of the risk premium that had built up over Middle East concerns has
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
Research: Analysis of the Australian sheep flock
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.