Wheat crop

The wheat futures market finished virtually unchanged for the week. We should prob-ably consider this a win as corn and beans keep making new lows but also a falling world cash price (wheat) as exporters fight tooth and nail for the limited demand out there.

In the US, corn prices are now below the cost of production. The so-called ‘fight for acres’ as commodity prices are manipulated to try to incentivise growers to plant, may become a full-blown capitulation.  Similarly, despite the stockpiles of US beans, cheap new season Brazilian beans are being imported into the US as the US$50/t difference in price is more than enough to compensate for freight and storage.

 

So where will the next lot of bullish news come from?  In the next few weeks, we should start seeing acreage reports.  Don’t be surprised to see some relatively significant shifts, especially in the more marginal US counties away from corn and beans.

 

Low prices also tend to incentivise importers, especially if they feel that prices are plateauing. While demand has been considered lacklustre, the truth is it has always been there, but the consumer is buying hand to mouth. It is the elastic demand, the additional purchases made outside of ‘normal’, that spurs the market, and it is this that has been lacking. If the market continues to show signs of bottoming, maybe this will change.

 

The Chinese New Year (two-week holiday) is over and it was hoped that we would see an uptick in consumer demand.  But two things have happened in the last couple of weeks.  Firstly, the Chinese Agriculture Ministry has said storm damage done to their corn crop was far less than initially reported. This immediately dampens their demand for feed. Secondly, the Chinese pork industry has been under pressure as economic conditions start to bite. This has lowered the price of pork, squeezing feed margins. The Chinese Government is trying to prop up the economy by providing stimulus where required and dropping mortgage rates.  If we see the economy show signs of improving, it is hoped this will flow through to commodity demand.

 

Politics will still have a place in commodity pricing.  The war in Ukraine, while still raging, is not affecting supply channels as it did in the immediate aftermath. The issues in the Red Sea have become yesterday’s news.

 

If you are a commodity trader, or a farmer sitting on unsold grain, 2024 is proving to be a tough year – and it has only just started. Forever the optimist, however, I’d like to think there will be some pricing opportunities before too long.

Next week

It remains a case of hurry up and wait. The spring (Northern Hemisphere) weather market will likely throw up the odd curve ball. Until then the market will follow the path of least re-sistance.

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Click on graph to expand

Click on graph to expand

Data sources: USDA, Barchart, Reuters, Next Level Grain Marketing

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