Having fallen sharply for the month of June, the wheat market enjoyed something of a bounce last night. Having hit seasonal lows, the price seemed too good to ignore with several new import tenders being announced.
The tenders give a wealth of insight into consumer and exporter
behaviour. Two weeks ago, Egypt’s GASC issued a tender for 200kmt
which it purchased from Romania and Bulgaria for US$250/t FOB. Two nights ago, GASC issued another tender
for 470kmt and was offered over 2.1mmt. The tender was awarded to Russia,
Ukraine and Romania at US$226 FOB – well below the previous mark. The
combination of old and new season crop shows that business remains extremely
competitive.
However, the world’s consumers are starting to wake up.
Saudi announced a tender for 595kmt (on the back of Egypt and Algeria)
and the US weekly export pace exceeded expectations on the back of the USD
retreating.
While the market now seems comfortable in the adjusted Russian
production (now 80mmt down from 93mmt) the world’s consumers are trying to stay in front of the curve. Early harvest
results remain positive with higher-than-expected yields, however, as harvest moves into the more seriously droughted
and frosted areas, there is an expectation that yields will fall. Whether they
fall enough to make the Russian crop sub 80mmt remains to be seen.
There is a raft of new crop data about to hit the market. The USDA release their area report tonight which will be closely monitored for any
deviations away from the expected. Canada also released their sowing intentions
yesterday which showed a slightly smaller wheat area (down 1.5%), but higher
canola area (up 2.9%) on the March estimates. Significantly, barley planted
area is down 10% on expectations and nearly 13% lower than last year.
Feed prices are expected to remain under pressure this year due to the
abundance of corn. US corn stocks are likely to stay unchanged this year
(pending USDA report) which will continue to weigh down global feed prices. Keep an eye
on US weather. We know the market likes to ‘kill’ the crop every year, resulting in a fear-based rally and it is currently very wet through Minnesota, South Dakota and
Illinois. There is a long time to go for the corn and bean crops so any
significant weather-related story is not likely to emerge until late August when the crops are
flowering.
Next week
The increase in consumer demand is very welcome. However, in order to see continued strength in the wheat market, we will need to see evidence of increased demand (hello India) and raising global cash values
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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.
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Imports breathe life into wheat
The tenders give a wealth of insight into consumer and exporter behaviour. Two weeks ago, Egypt’s GASC issued a tender for 200kmt which it purchased from Romania and Bulgaria for US$250/t FOB. Two nights ago, GASC issued another tender for 470kmt and was offered over 2.1mmt. The tender was awarded to Russia, Ukraine and Romania at US$226 FOB – well below the previous mark. The combination of old and new season crop shows that business remains extremely competitive.
However, the world’s consumers are starting to wake up. Saudi announced a tender for 595kmt (on the back of Egypt and Algeria) and the US weekly export pace exceeded expectations on the back of the USD retreating.
While the market now seems comfortable in the adjusted Russian production (now 80mmt down from 93mmt) the world’s consumers are trying to stay in front of the curve. Early harvest results remain positive with higher-than-expected yields, however, as harvest moves into the more seriously droughted and frosted areas, there is an expectation that yields will fall. Whether they fall enough to make the Russian crop sub 80mmt remains to be seen.
There is a raft of new crop data about to hit the market. The USDA release their area report tonight which will be closely monitored for any deviations away from the expected. Canada also released their sowing intentions yesterday which showed a slightly smaller wheat area (down 1.5%), but higher canola area (up 2.9%) on the March estimates. Significantly, barley planted area is down 10% on expectations and nearly 13% lower than last year.
Feed prices are expected to remain under pressure this year due to the abundance of corn. US corn stocks are likely to stay unchanged this year (pending USDA report) which will continue to weigh down global feed prices. Keep an eye on US weather. We know the market likes to ‘kill’ the crop every year, resulting in a fear-based rally and it is currently very wet through Minnesota, South Dakota and Illinois. There is a long time to go for the corn and bean crops so any significant weather-related story is not likely to emerge until late August when the crops are flowering.
Next week
The increase in consumer demand is very welcome. However, in order to see continued strength in the wheat market, we will need to see evidence of increased demand (hello India) and raising global cash values
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: Rabobank, USDA, Reuters, Next Level Grain Marketing, Mecardo
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
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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.
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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.
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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.