Funny fact that as soon as you call the market in one direction, it can and usually does, the opposite. I’ll own it - last week I stated that I thought it would be difficult for wheat to rally, based on cheap Black Sea grain, Aussie harvest pressure, slack Chinese demand. This week I’m not so sure. The question is, will we see the market in full reversal mode or will it peter out in the absence of fresh bullish news.
This weeks catalyst for the wheat market rally has been over fears of freeze damage in the US. A series of storms is due to hit combining with a frigid pool of very cold Arctic air. The mixture of rain, sleet, snow and ice is forecast to be a huge dump of moisture across the Canadian and US territories. While the moisture will be welcome, the cold ‘could’ be detrimental in winter wheat areas without adequate snow cover. So the question will be what comes first, the snow or the freeze? While the US HRW crop is generally considered to be in very poor condition, I can’t help thinking that this storm will do more good than harm. Remember, the market likes to ‘kill’ the crop a couple of times throughout its life cycle.
A much better than expected week of US export business also added impetus to the rally. The US has been struggling to attract anything other than routine business due to high wheat prices and an unfavourable exchange rate. The recent fall in wheat prices brought US wheat back into reach and a series of import tenders resulted in a good week. In fact all major ag commodities had a good week, including soybeans which were helped by a 1.3mmt sale into China. China has been favouring Brazilian origins, so a return to the US is a welcome sign for prices.
Fundamentally, wheat should be supported. Despite a slight relaxing of major exporter stocks, the stocks to use numbers are still historically tight. European export pace (particularly French) has been through the roof and they are at risk of having to ration demand. If China re-emerges from their COVID lockdowns with a renewed appetite, it could change the whole market.
The one factor that no-one has a really good handle on, is the actions of the algorithm or technical traders. The wheat market is heavily weighted to the sold (short) side with a relatively thin number of participants. Should sentiment change and they all rush for the door, it could make for a very volatile period. Stay on your toes!
Next week
It feels like the wheat market has turned a corner. The sell off has eased and we are possibly in an over sold corrective phase. Personally I favour a levelling of prices rather than a prolonged rally. Given my recent form, that is probably the kiss of death. Merry Christmas.
Another week, another very mixed result. Last week, Middle Eastern politics drew the market’s attention, this week it’s all about the weather. Russia looked to
The worm seems to have turned somewhat in the grain and oilseed complex. While there is some short-term support coming from yet more geopolitical unrest,
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Is the ‘bottom’ in?
Next week
It feels like the wheat market has turned a corner. The sell off has eased and we are possibly in an over sold corrective phase. Personally I favour a levelling of prices rather than a prolonged rally. Given my recent form, that is probably the kiss of death. Merry Christmas.
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Sources: Reuters, SovEcon, Next Level Grain
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Time to cut the BOM some slack
Another week, another very mixed result. Last week, Middle Eastern politics drew the market’s attention, this week it’s all about the weather. Russia looked to
Moving in the right direction
The worm seems to have turned somewhat in the grain and oilseed complex. While there is some short-term support coming from yet more geopolitical unrest,
Geopolitics and shorts weather
Amazing the difference a week can make. It all started last Friday morning, with continued escalations in the Middle East. The wheat market jumped 20
Exchange rates helping wheat values
The exchange rate has been in the news lately, with the Australian dollar falling to a six-month low last week. Given this, we thought it
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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.