Has the cavalry arrived? UN to the rescue.

Fluttering,United,Nations,Flag,Mockup,With,The,Place,For,Your

The brakes were put on commodity markets in the past couple of sessions as a raft of economic data shows slowing growth causing investors across a slew of stocks and commodities to dump and run.

Specifically for the ag commodities, news that the UN was busy negotiating with Russia and Ukraine to try and avert a humanitarian crisis brought on by the war, has seen wheat and corn tumble.  The premise of the negotiations is to allow Ukrainian exports through the Black Sea and grant Russian exports of fertiliser. It is thought that Russia will play nice if some of the economic sanctions are lifted. It shows how tightly wound these markets are.  The fact that the mere suggestion of a ‘work around’ can see 69ȼ/bu or AU$39/t stripped from the Dec ’22 contract, since Wednesday, is quite extraordinary.

The question has to be asked though, is this the beginning of a major correction?  The fundamentals of production remain bullish.  The ongoing war in Ukraine, historically low yield estimates in US HRW country, Indian wheat production cut, French drought issues etc etc.  But the other side of the coin is demand.  Are we seeing a tipping point in the market, where buyers simply evaporate because of high prices, credit issues or switching to lower cost alternatives (i.e. rice).

After seemingly endless bullish stories, is the market finding some balance?

Russian analyst SovEcon has lifted Russian production to a whopping 88.6mmt, citing average yields over 4t/ha.  USDA has Russia at 80mmt, but an ideal season and no shortage of fertiliser and inputs, is giving rise to a potential record crop.  This in itself could provide a very logical answer to the demand situation mentioned above.  Buyers may simply have to tighten their belts for the next month or so until a sizeable Russian crop becomes available.  The next question will be can they meet the export pace required to move the 44mmt export target?

Changing topic slightly, the US farmer was able to crack the whip this past week and made up some lost time in their seeders.  Major corn producing states Iowa and Illinois are now at 57% and 54% completed, up from 14% and 15% last week.  They are still well beind average, but the gains made in the past week demonstrate that the crop can get in the ground quickly when conditions suit.  Another couple of good sowing days are ahead before weather turns wetter again in the corn belt, which should see another big swathe of corn country get seeded.  Sentiment in the corn market has softened a little as it appears that the crop will get planted and there is plenty of moisture.

The week ahead….

There are a lot of moving pieces to this puzzle.  After a sizeable correction, we may see buyers re-emerge.  There is still plenty of support in the wheat market, but I guess the one thing we can take from this week is that nothing goes up forever. 

Have any questions or comments?

We love to hear from you!
Print This Post

Click on graph to expand

Click on graph to expand

Click on graph to expand

Data sources: AWEX, Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Grains & Oilseeds

Why are diesel prices smoking?

Australian diesel prices for farmers have reached their highest levels on record recently, but what has been the cause, and will the situation improve anytime

Read More »
round hay bales
Grains & Oilseeds

Demand dry in the hay market

Feed demand and hence prices can be looked at as a solid indicator of pastoral conditions, producer intentions, and of course availability. QLD hay prices

Read More »
Australian wheat shipping terminal
Grains & Oilseeds

The sharks are circling

It was a bloodbath in the agricultural commodities last night, indeed the whole week. Since last Friday, Dec ’22 wheat has lost 139¢/bu or $62/t

Read More »
Percentiles with a background image of hay bales
Cattle

Percentiles – June 2022

Mecardo’s Percentiles update for June 2022. Click below to view the latest report Grains Oilseeds Sheep and lambs Cattle Wool Dairy Fuel Percentiles are an important

Read More »

Don’t have an account with us? Join free.

You can have full premium access to all of our content with a monthly or annual subscription. 

Alternatively, create a free account to access our Insights blog and two free premium article a month!

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
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.

Photo of a farmer surrounded by Merino sheep in dusty yards
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. 

Image of harvested grain pouring into a chaser bin
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.