Someone forgot to feed the bulls. After a solid buying spree, China has stopped pick-ing up the phone. Having purchased 1.9mmt of US SRW wheat, the wheat market surged 80c/bushel. For reference, China usually buys 100-200kmt of SRW per year. Since last Friday however, the flash sales have stopped and the market quickly retraced from the recent highs.

Some are calling it the Great Chinese Wheat Robbery, a nod to the 1972 Russian Wheat Trade where the Soviet Union purchased 10mmt of subsidised US wheat.  This was at a time when world stocks were not closely monitored, so the large purchases led to the severe depletion of global stocks resulting in surging prices.  This time around, the Chinese seem to have simply taken advantage of a dip in the market and bought accordingly.


Other markets have struggled to move at the same pace as CBOT.  European markets barely registered a blip after they largely missed out on last week’s big Egyptian tender.  Russia remains the dominant force in Africa and the Middle East, leaving little room for other origins to compete.


There appears to be a brief window of opportunity for these other origins as Black Sea logistics typically hinder export pace during the winter months.  It does spell a warning, however, that Russian exports will again be a dominant force as soon as the weather improves.


Globally, buyers have been relatively slow off the mark.  A combination of economic pressures and a view perhaps that the wheat market was grinding lower, has kept demand only just bubbling over.  The big Egyptian tender and the recent Chinese business may signify a change in appetite with Algeria and Saudi Arabia also announcing tenders in the last 24 hours.


Last week I called the market ‘bottom’.  This downward correction was probably expected after the surprise sales of US SRW stocks and the resultant jump in prices.  The fact that US SRW stocks have been drawn down further than expected makes it feel that the floor in prices has been raised slightly.  US domestic buyers will be well aware that they’ll have to pay a bit more now and this should be enough to keep CBOT well supported.

Next week

All eyes will be on the winners of the Saudi and Algerian business. If it is dominated by Russian grain, then expect more of the same. Should European, US, and or Aussie win some business, it will be positive for prices.

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Click on graph to expand

Click on graph to expand

Data sources: Reuters, SovEcon, Next Level Grain Marketing, Mecardo

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