The surge in the energy sector has also spilled over into alternative fuels, primarily corn ethanol and biodiesel. If the conflict drags on, pressure will likely mount to increase mandated blending rates to stretch petroleum supplies further. That would potentially strengthen the demand outlook for crops used in biofuels, particularly for canola, soybeans and corn.
The relationship between crude oil and wheat is more difficult to quantify. There is certainly a correlation, but the extreme volatility in oil markets over the past 10 days has made that relationship harder to interpret in the short term. Broadly speaking, however, wheat prices tend to follow the direction of crude.
Over the longer term, if higher energy costs reduce planted acreage or compromise yields, global wheat supply could be affected. Given that wheat demand is relatively inelastic, the additional stocks built up over the past couple of years could be drawn down surprisingly quickly.
Changing tack, the weather market is beginning to re-emerge as a factor.
As noted previously in this column, the US Plains have remained dry, particularly across the key HRW wheat states of Texas and Oklahoma. The crop is now moving into its active growth phase and is becoming increasingly in need of moisture. At this stage, there is little relief in the seven-day forecast, something the market will be watching closely.
Conditions in the Black Sea region are somewhat more favourable. Warmer temperatures are reducing the risk of ice crusting and beginning the snowmelt process, which should support early crop development. Some central areas still require additional moisture to catch up, but there are no major warning signs yet.
Meanwhile, the Indian government has estimated its wheat crop at 120mmt, exceeding the previous record of 117mmt. This comes as authorities have issued export permits for 2.5mmt, easing the export ban that has been in place since 2022.
Next week
How the market reacts to announcements of released Diesel from reserves in Australia will be important for the direction of other commodities locally.
The United States Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) Report was released on Friday, showing a tightening trend across wheat
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.
Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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.
Energy sector surge and weather market continues
The relationship between crude oil and wheat is more difficult to quantify. There is certainly a correlation, but the extreme volatility in oil markets over the past 10 days has made that relationship harder to interpret in the short term. Broadly speaking, however, wheat prices tend to follow the direction of crude.
Over the longer term, if higher energy costs reduce planted acreage or compromise yields, global wheat supply could be affected. Given that wheat demand is relatively inelastic, the additional stocks built up over the past couple of years could be drawn down surprisingly quickly.
Changing tack, the weather market is beginning to re-emerge as a factor.
As noted previously in this column, the US Plains have remained dry, particularly across the key HRW wheat states of Texas and Oklahoma. The crop is now moving into its active growth phase and is becoming increasingly in need of moisture. At this stage, there is little relief in the seven-day forecast, something the market will be watching closely.
Conditions in the Black Sea region are somewhat more favourable. Warmer temperatures are reducing the risk of ice crusting and beginning the snowmelt process, which should support early crop development. Some central areas still require additional moisture to catch up, but there are no major warning signs yet.
Meanwhile, the Indian government has estimated its wheat crop at 120mmt, exceeding the previous record of 117mmt. This comes as authorities have issued export permits for 2.5mmt, easing the export ban that has been in place since 2022.
Next week
How the market reacts to announcements of released Diesel from reserves in Australia will be important for the direction of other commodities locally.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: Reuters, Rabobank, SovEcon, Next Level Grain Marketing, Bloomberg, Mecardo
Categories
Have any questions or comments?
Black Sea Risk Rises
To paraphrase the old Footy Show, it’s been a BIG week in grain markets. It all kicked off last Friday with the USDA’s July supply
Global wheat and corn supplies edging lower.
The United States Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) Report was released on Friday, showing a tightening trend across wheat
Weather wobbles
All the major agricultural commodities had their turn in the spotlight this week. Corn and soybeans led the AG complex higher early on, driven by
Selective pulse planting reactions
It seems an age ago now, but back at winter crop planting time, there were all sorts of decisions being made around rising fertiliser and
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.
MEET THE TEAM
Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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.