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Yesterday’s headlines become today’s footnotes and as for the wheat market, the rally driven by news that Russia fired warning shots at a grain cargo vessel lost its steam and was replaced by reports of harvest progress & export flows. It appears that we are going to need to see a genuine interruption to supply before the market sustains a rally.

The US agriculture belt has received good rain in the last fortnight which has weighed on the market. This favoured much of the central and southern Corn Belt, except for parts of Wisconsin, Minnesota, and North Dakota. The cool temperatures there have also helped to minimize the soil moisture loss in the dryer areas.

U.S. corn conditions were rated 59% good/excellent up from 57% a week earlier, and 57% a year ago. U.S. Soybeans conditions were rated 59% good/excellent, up 5 points from a week earlier and 1 point from a year ago. August is a critical month for beans with podding hitting its straps. As we reported earlier this week (read here) In the latest WASDE report the USDA trimmed corn and bean yields to reflect tough early conditions, but the overall production outlook remains promising. U.S. winter wheat was 92% harvested, in line with the average. 42% of the U.S. spring wheat crop was rated good/excellent, up from 41% last week but down from 64% last year.

Despite the threats on vessels in the Black Sea, grain does continue to flow; and from Russia, it’s happening at pace. The most recent estimates from the USDA indicate almost a quarter of the world’s wheat trade will now come from Russia. However, there is speculation that late rain in Europe and Southern Russia may see widespread quality downgrading. One estimate suggests that 50% of Russian exportable wheat could be feed grade. If this is the case, it will put a huge emphasis on quality milling grade supplies out of Australia.

CBOT Dec ’23 SRW futures dropped $21 AUD/T (-6%) week on week by the close of Thursday. The decline in futures didn’t translate into local new crop pricing. APW for Geelong delivery lifted 1.5% to end Thursday at $397/T. This is around $15/T higher than values at the start of August.

After the initial rally on the news of China suspending the tariffs on Australian Barley, prices have held strong. Geelong old crop feed barley prices at $336/T are $7 higher than a week ago, while in Port Kembla old crop barley is at $355/T. Dry conditions in southern QLD and northern NSW are limiting crop prospects and feed availability. This is seeing WA barley pricing into QLD as feedlot demand lifts. Additional demand from China could create a welcome pull on prices as competitive forces ramp up. If barley prices continue to climb there will be a point where low-quality wheat out of the Northern Hemisphere could start to replace barley in the SE Asian and Chinese markets.

Next week

Attention is turning to the Southern Hemisphere. Reports out of Argentina suggest that after three years of drought, Argentine crops are in the ground and in good condition. Australian winter crops, except in a few areas, could do with a drink after a dry July. The next couple of weeks appear to be crucial for our own production outlook. With more traditional El Nino behaviour now resurfacing around the globe, the crops are not home yet.

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Data sources: Next Level Grain Marketing, Nutrien, USDA, Bloomberg,  Mecardo

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