This week has seen the wheat market jump on cuts to Russian production, only to give most of the gains back as rains appeared in the forecast to stabilise the crop.
Various crop analysts started to ratchet the Russian crop back from 93mmt to today being somewhere around 81 – 83mmt due to the well established dry and frosty conditions through May. The same dry conditions were also seen taking a bite out of Ukrainian production with the UGA (Ukrainian Grains Association) publishing a 19.1mmt wheat crop – down nearly 1mmt from their previous estimate. As the week progressed however, rain appeared in the forecast, helping to alleviate some concerns around building temperatures.
The market was seeing rapid rises, passing through 700USc/bu in the spot month while the production estimates were seemingly being lowered on a daily basis. However, the bulls need feeding every day. As the news about lower production dried up, so did the momentum of the rally, eventually turning lower on profit taking and easing concerns.
India is also finding its way into the headlines. There have been rumours swirling for a while now that Indian wheat stockpiles are getting dangerously low, resulting in a spike in domestic prices. In a country with a high rural population, higher staple food prices are a dangerous mix – especially in an election year. The Indian Government has moved to address any potential unrest by removing a 40% import tariff, effectively allowing the import of foreign wheat. It is assumed that once the various millers and traders have bought enough, the tariff will be reintroduced so as to find that balance between moderating high food prices, versus maintaining a profitable price for their wheat farmers.
The extra demand from India could be as much as 3-5mmt this year. Most is expected to be sourced from Russia, but the extra demand would be seen as tightening available stocks.
The US crop looks to be building after recent rains. While much of the headlines have been on the wild weather, storms and tornado’s, the rain that they have brought is adding bushels. Condition scores have dropped a few percent, reflecting too much rain in some of the SRW wheat areas and this is also leading to some seeding delays in corn and beans (at 83% and 67% complete respectively). Yield trends lower after mid May and there is some concern that these later sown crops will not reach their potential.
Next week
The dry WA and SA cropping areas finally received an opening rain this week which has seen basis deteriorate in cash prices. Much more is needed if Australia is to produce anything like the 29mmt forecast by the USDA.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its June Crop Report last week. The June Crop Report is the first
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India a demand dark horse
Various crop analysts started to ratchet the Russian crop back from 93mmt to today being somewhere around 81 – 83mmt due to the well established dry and frosty conditions through May. The same dry conditions were also seen taking a bite out of Ukrainian production with the UGA (Ukrainian Grains Association) publishing a 19.1mmt wheat crop – down nearly 1mmt from their previous estimate. As the week progressed however, rain appeared in the forecast, helping to alleviate some concerns around building temperatures.
The market was seeing rapid rises, passing through 700USc/bu in the spot month while the production estimates were seemingly being lowered on a daily basis. However, the bulls need feeding every day. As the news about lower production dried up, so did the momentum of the rally, eventually turning lower on profit taking and easing concerns.
India is also finding its way into the headlines. There have been rumours swirling for a while now that Indian wheat stockpiles are getting dangerously low, resulting in a spike in domestic prices. In a country with a high rural population, higher staple food prices are a dangerous mix – especially in an election year. The Indian Government has moved to address any potential unrest by removing a 40% import tariff, effectively allowing the import of foreign wheat. It is assumed that once the various millers and traders have bought enough, the tariff will be reintroduced so as to find that balance between moderating high food prices, versus maintaining a profitable price for their wheat farmers.
The extra demand from India could be as much as 3-5mmt this year. Most is expected to be sourced from Russia, but the extra demand would be seen as tightening available stocks.
The US crop looks to be building after recent rains. While much of the headlines have been on the wild weather, storms and tornado’s, the rain that they have brought is adding bushels. Condition scores have dropped a few percent, reflecting too much rain in some of the SRW wheat areas and this is also leading to some seeding delays in corn and beans (at 83% and 67% complete respectively). Yield trends lower after mid May and there is some concern that these later sown crops will not reach their potential.
Next week
The dry WA and SA cropping areas finally received an opening rain this week which has seen basis deteriorate in cash prices. Much more is needed if Australia is to produce anything like the 29mmt forecast by the USDA.
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Data sources: SovEcon, USDA, Reuters, UGA, Next Level Grain Marketing, Mecardo
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The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its June Crop Report last week. The June Crop Report is the first
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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.
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.
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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.