Having briefly flirted with prices below 500c/bu, the CBOT Dec ’24 contract is relatively unchanged week on week after some minor adjustments were made to Canadian, French and German production.
This week’s lift in futures has been a welcome reprieve from what seems like a
constant drain lower. For the month of August, CBOT Dec ’24 has only lost 3c/bu but has had a trading range of 44c/bu from the
monthly highs to the monthly lows. For reference, the Dec ’24 contract has lost nearly 100c/bu since the start of the year. With
any sort of luck, we might be seeing the wheat price starting to level out as
the Northern Hemisphere harvest winds up.
After a hot and dry summer period, Canadian spring wheat was trimmed by
1.2mmt to 25.4mmt, down 100kmt on last year and well below previous estimates.
All wheat production at 34mmt still holds its head above last year courtesy of
an improved durum production figure.
France
AgriMer reports that the French harvest was seen as falling short of five-year
averages for both test weight and protein. It is estimated that only 25% of the
country’s crop will make milling export quality due to poor test weights and
only half the crop is meeting trade specifications (11.5%) protein levels.
Argus estimates French wheat production at 25.2mmt which is nearly 10mmt
below last year’s crop and represents a 27% drop on the five-year average.
Separately, Germany’s Ag ministry reported all-wheat harvest in the EU’s
second-ranked grower at 18.8mmt, below USDA estimate of 20.3mmt with
expectations of a dip in quality as well.
In total, the EU Commission has cut a further 4mmt from the bloc’s
production in the last month.
The flip side to all this is that demand continues to lag. Bloomberg reports that Chinese buyers have
been instructed to buy less barley and sorghum “to ease domestic oversupply and bolster local prices”. The timing is thought to impact supplies from November onward, with
existing sales not affected by the State directive. It will be interesting to watch demand going
forward. It could be a classic false flag headline aimed at lowering prices and
allowing the buyers an opportunity to buy.
However, if we were to see subdued demand from China – on top of high
supply – it would complete a very bearish scenario for feed grains. Things can change quickly, with 2 cargoes of US sorghum confirmed to
have been sold to China this morning.
Next week
Watch consumer activity closely. If the market appears to be levelling out, there might be a flurry of activity to try and capture the market at its lows.
Canola pricing has continued its rollercoaster price trend in recent weeks, as international values fluctuate on political announcements. Wheat has been much more benign, although
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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.
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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Harvest quality plagues wheat
This week’s lift in futures has been a welcome reprieve from what seems like a constant drain lower. For the month of August, CBOT Dec ’24 has only lost 3c/bu but has had a trading range of 44c/bu from the monthly highs to the monthly lows. For reference, the Dec ’24 contract has lost nearly 100c/bu since the start of the year. With any sort of luck, we might be seeing the wheat price starting to level out as the Northern Hemisphere harvest winds up.
After a hot and dry summer period, Canadian spring wheat was trimmed by 1.2mmt to 25.4mmt, down 100kmt on last year and well below previous estimates. All wheat production at 34mmt still holds its head above last year courtesy of an improved durum production figure.
France AgriMer reports that the French harvest was seen as falling short of five-year averages for both test weight and protein. It is estimated that only 25% of the country’s crop will make milling export quality due to poor test weights and only half the crop is meeting trade specifications (11.5%) protein levels. Argus estimates French wheat production at 25.2mmt which is nearly 10mmt below last year’s crop and represents a 27% drop on the five-year average.
Separately, Germany’s Ag ministry reported all-wheat harvest in the EU’s second-ranked grower at 18.8mmt, below USDA estimate of 20.3mmt with expectations of a dip in quality as well. In total, the EU Commission has cut a further 4mmt from the bloc’s production in the last month.
The flip side to all this is that demand continues to lag. Bloomberg reports that Chinese buyers have been instructed to buy less barley and sorghum “to ease domestic oversupply and bolster local prices”. The timing is thought to impact supplies from November onward, with existing sales not affected by the State directive. It will be interesting to watch demand going forward. It could be a classic false flag headline aimed at lowering prices and allowing the buyers an opportunity to buy. However, if we were to see subdued demand from China – on top of high supply – it would complete a very bearish scenario for feed grains. Things can change quickly, with 2 cargoes of US sorghum confirmed to have been sold to China this morning.
Next week
Watch consumer activity closely. If the market appears to be levelling out, there might be a flurry of activity to try and capture the market at its lows.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: Bloomberg, Reuters, CRM Agri, Argus, France AgriMer, 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.