Mecardo Bulls looking to wrestle control back from the Bear

Wheat finished the week with a small jump having been sold off for most of the week on the back of uncompetitive US wheat export pricing. US exports for the week were borderline dismal barring some routine business. Wheat had been trading a fairly narrow range between 850-950 USc/bu, so a close below the key level of support in 850c/bu could have heralded another step lower to the next of support at 800c/bu. However, the recent downtrend is looking unlikely to continue if news coming out of the Black Sea is right.

The Grain Corridor is again in Russia’s sights, seemingly unhappy that Ukrainian grain is going where ever it likes, whereas Russian exports are still ‘hobbled’ by various sanctions.

This comes at a time when Russian grain exports are seen as increasing and actually surpassing pre-invasion export pace (Oct export pace up 13% year on year). The sticking point is that Moscow sees the continuing impact of Western sanctions on logistics, payments, shipping and insurance prevents it from exporting fertilisers and chemicals – which were a centre piece of the deal, brokered in July by Turkey and the UN. A speech given by the Russian ambassador to the UN yesterday appeared to pour cold water on the deal unless the restrictions were removed.

US weather is in the spot light with drought conditions increasing across the agricultural belt. Mississippi River water levels are at record lows and impassable in places. A forecast rain this week will help but more is needed to improve water flow, especially as winter is coming. US HRW wheat emergence is behind average as dry conditions hamper germination and establishment. Forecast rain over the 1-7 day period will miss the majority of HRW areas.

Argentina is also in the grip of drought with the local grain exchange (BAGE) calling the 22/23 crop 15mmt, down from 23mmt last year. A late frost has further dented production hopes with fears that actual results may be worse than anticipated.

The week ahead….

It will be interesting to see if wheat reaffirms an uptrend or if the recent weakness is a sign that prices are stagnating. The dip in prices will help the US regain some competitiveness against global values.