Firstly, Russia has been the biggest surprise. A few weeks ago, some analysts were tipping a 85-86mmt wheat crop. Earlier this week, SovEcon cut production to 76.4mmt (-5.9mmt) and IKAR published a 77mmt (-4.5mmt) based on hot and dry weather over the past couple of weeks as well as earlier winter kill issues. As a result of these cuts, Black Sea origin FOB values have risen between US$5-7/t.
Germany is also citing last minute reductions in yield expectation due to poor late season weather.
Agriculture and Agri-Food Canada (AAFC) cut its most recent forecast of spring wheat production by 11% to 25.6mmt, down sharply from previous estimates. That agency also reduced spring wheat export forecasts to 17.7mmt, down 16% from last year. There is still a lot of speculation around Canada with production estimates ranging from 20 – 30mmt. Ahead of the USDA’a WASDE August report, it will be interesting to see if, and how much the USDA cut production.
While there has been some trimming of estimates in the EU27, it is still expecting a big crop and combined with Australia (30mmt?) will go some way towards stabilising global wheat supply.
It appears that major exporter supplies are going to run down this season and become worryingly tight. There is no clear substitute for wheat with corn production also facing problems. After the Southern Hemisphere harvest (Aust and Argentina) there will be no new crop entering the supply channels until July/August next year. Expect wheat prices to stay inflated or at the very least volatile, for some them to come.
Death by a thousand cuts
Firstly, Russia has been the biggest surprise. A few weeks ago, some analysts were tipping a 85-86mmt wheat crop. Earlier this week, SovEcon cut production to 76.4mmt (-5.9mmt) and IKAR published a 77mmt (-4.5mmt) based on hot and dry weather over the past couple of weeks as well as earlier winter kill issues. As a result of these cuts, Black Sea origin FOB values have risen between US$5-7/t.
Germany is also citing last minute reductions in yield expectation due to poor late season weather.
Agriculture and Agri-Food Canada (AAFC) cut its most recent forecast of spring wheat production by 11% to 25.6mmt, down sharply from previous estimates. That agency also reduced spring wheat export forecasts to 17.7mmt, down 16% from last year. There is still a lot of speculation around Canada with production estimates ranging from 20 – 30mmt. Ahead of the USDA’a WASDE August report, it will be interesting to see if, and how much the USDA cut production.
While there has been some trimming of estimates in the EU27, it is still expecting a big crop and combined with Australia (30mmt?) will go some way towards stabilising global wheat supply.
It appears that major exporter supplies are going to run down this season and become worryingly tight. There is no clear substitute for wheat with corn production also facing problems. After the Southern Hemisphere harvest (Aust and Argentina) there will be no new crop entering the supply channels until July/August next year. Expect wheat prices to stay inflated or at the very least volatile, for some them to come.
The week ahead….
Next week: Finally, a word of caution. As they say in the trade, nothing cures high prices like high prices. If prices get too high, some countries may be forced to buy hand to mouth simply as a means to manage credit.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Click on graph to expand
Data sources: USDA, Reuters, SovEcon, USW, Mecardo
Categories
Have any questions or comments?
Wheat finds its feet
Wheat is doing something highly unusual. It is going up. Having withered on the vine for the best part of 12 months, wheat has finally
A Look ahead for grain and oilseed markets
This year has been one of relatively consistent price declines for grain and oilseed markets. Coming out of a season where we reached record levels
Wheat weaves its tangled web
Did Australian weather just move the market’s needle? After weeks of the market edging lower and lower (we hit multi-year lows earlier this week with
Barley shows upside as harvest is held up
2023 Winter crop harvest has stalled with rainfall on the East Coast dampening progress. There is still plenty of grain and oilseed to still come
Want market insights delivered straight to your inbox?
Sign up to the mailing list to get regular updates to new analysis and market outlooks
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.
SERVICES AND CAPABILITIES STATEMENT BROCHURE
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.