Wheat field Australia

The wheat market was able to post some modest gains for the week with geopolitics, weath-er and some technical short covering adding support. Oilseeds too, found support after Eu-rope's excessively wet winter and concerns around a dry Canada and reduced area expecta-tions. Fund managers have also been proactive in reducing their large, short (sold) positions ahead of the Northern Hemisphere Spring.

Egypt’s GASC issued a tender to purchase wheat and bought 110kmt from European origins, from a total of 2mmt offered. CBOT wheat did its best tortoise impersonation and quickly pulled its head in, overwhelmed by the sheer volume of cheap grain being offered. Interesting to note that Russia was not the cheapest and did not feature on the podium. In fact, Russian wheat FOB values have increased week on week to around US$202-205/t. March exports are expected to top 4.8mmt, erasing the Feb record of 4.1mmt.

Part of the increase can be attributed to a perception that the Russian crop could do with a drink. Despite adequate moisture before dormancy, and no real problems over winter, the past 30 days have been abnormally dry. The next 10-day period remains dry as well. Were this trend to continue, say until mid-April when the crop would be approaching flowering, it could completely turn the market on its head.

Stratégie Grains (European analysts) reduced their EU27 wheat and barley forecasts due to wet weather, particularly in France. The wheat crop was reduced a further 1mmt to 121.6mmt, down 4% year on year.  For reference, the European Grain Association Coceral has EU27 wheat production at 134mmt, so there is a fair bit of discrepancy between organisations.

The French wheat crop was also rated 66% good/excellent, slipping 2% points on the week.  The 2020 crop (which was very poor) was rated 63% good to excellent at the same time of year.

Canola has had a very welcome boost in the past couple of weeks. Concerns around oilseed production in Europe and Canada for the 24/25 season have lifted MATIF (Euro market exchange) and spurred some technical short-covering. Rising crude prices and tightening Malaysian Palm Oil stocks are also helping. 

Smaller rapeseed crops are already expected in Europe and Ukraine in 2024.  Stratégie Grains predicts an 8% fall in the EU27 crop from 2023, while UkrAgroConsult points to a 9% decline in Ukraines crop.  A recent grower survey in the UK indicated a 28% swing away from the crop. Longer term, the large soybean crop in Brazil and the potential for global stocks to build year on year will keep a lid on prices.

Next week

Short term I think the market resumes a negative trend. The funds have trimmed their short positions, the global cash price is still being pressured by surplus supply – particularly from Europe and the Black Sea – and it remains too early to make too many predictions about Northern Hemisphere production.

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Click on graph to expand

Click on graph to expand

Data sources: Reuters, AHDB, Stratégie Grains, UkrAgroConsult, Next Level Grain Marketing, Mecardo

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