The wheat market has enjoyed something of a bounce this week. Having briefly touched multi-year lows of 525c/bu for the Dec ’24 contract last week, last night's close of 574c/bu was a welcome sight for farmers.
Fundamentally, not much has changed other than a few minor adjustments
to global supply & demand (as discussed last week) so the thought is that
the technical / algorithm traders simply decided it was time to rebalance a few
positions.
The recent dip in prices had flushed out some more consumers, with
Thailand and South Korea both issuing tenders. Russian ports sprang back to
life for the month of August with 5.2mmt being shipped, just shy of the record
5.3mmt shipped last year (SovEcon).
It is a timely reminder that the Black Sea remains the dominant force
in pricing and the recent rally, while technically driven, has now priced US
wheat out of the market.
Perhaps the most notable thing to happen in the market this week has
been the decision by the Chinese to launch an anti-dumping probe into Canadian
canola. The notice to investigate comes hot on the heels of Ottawa announcing a
100% import tariff on Chinese electric vehicles (EV’s) to protect the Canadian
car industry per Reuters. You could almost hear the collective groans from the Prairies as the
Canadian canola harvest has only just started.
Initially, the Winnipeg canola market came back hard but has recovered
to a degree while the finer points, timing of the investigation and any
potential retaliation become understood. The Chinese market, while an important
outlet, is not the only avenue available for Canada’s canola crop with
approximately 12mmt consumed domestically for the biodiesel industry.
If Canada were to seek other markets – notably Europe – it could impact
the demand for Australian origin seed. However, the Canadian crop is purely GM
which limits the amount that Europe will import. The flip side is if China
immediately stops the flow from Canada, it could turn to Australia to help fill
the gap. Combined with low supplies out of Europe, it makes for a compelling
bullish argument for canola prices.
Next week
Unless we see additional demand, it is possible that the wheat market will retrace some of the gains seen in the past week.
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China’s canola curve ball
Fundamentally, not much has changed other than a few minor adjustments to global supply & demand (as discussed last week) so the thought is that the technical / algorithm traders simply decided it was time to rebalance a few positions.
The recent dip in prices had flushed out some more consumers, with Thailand and South Korea both issuing tenders. Russian ports sprang back to life for the month of August with 5.2mmt being shipped, just shy of the record 5.3mmt shipped last year (SovEcon).
It is a timely reminder that the Black Sea remains the dominant force in pricing and the recent rally, while technically driven, has now priced US wheat out of the market.
Perhaps the most notable thing to happen in the market this week has been the decision by the Chinese to launch an anti-dumping probe into Canadian canola. The notice to investigate comes hot on the heels of Ottawa announcing a 100% import tariff on Chinese electric vehicles (EV’s) to protect the Canadian car industry per Reuters. You could almost hear the collective groans from the Prairies as the Canadian canola harvest has only just started.
Initially, the Winnipeg canola market came back hard but has recovered to a degree while the finer points, timing of the investigation and any potential retaliation become understood. The Chinese market, while an important outlet, is not the only avenue available for Canada’s canola crop with approximately 12mmt consumed domestically for the biodiesel industry.
If Canada were to seek other markets – notably Europe – it could impact the demand for Australian origin seed. However, the Canadian crop is purely GM which limits the amount that Europe will import. The flip side is if China immediately stops the flow from Canada, it could turn to Australia to help fill the gap. Combined with low supplies out of Europe, it makes for a compelling bullish argument for canola prices.
Next week
Unless we see additional demand, it is possible that the wheat market will retrace some of the gains seen in the past week.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: SovEcon, D Voznesenski, Reuters, Next Level Grain Marketing, Refinitiv, Mecardo
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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.
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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.