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To start the week, the wheat market got a very nice little push courtesy of Russian frosts, a bullish USDA report and technical short covering.

As covered in this week’s analysis, the USDA released their May WASDE report (read more here). In summary, 2024/25 wheat and corn stocks fell well below previous estimates while soybeans were considerably higher. The combined Russian/Ukrainian wheat crop was forecast down 5% year on year and exports down 7%.

The cold snap through central Russia saw several days of below 0°C and has affected 6 states totaling around 800kHa. It is thought that most of these crops will require reseeding.  It is also important to note that wheat makes up less than 50% of the crops affected. Official forecasts for Russia are now sub 90mmt, with SovEcon at 89.6mmt and IKAR using a 86mmt number. The worst of the weather in Russia appears to be over, with temperatures rising to seasonal norms and some rain on the forecast. Damage has been done in the South due to the dry conditions so any rain now will hold condition scores, not necessarily improve them.

Looking at the bigger picture, the USDA showed global wheat stocks of the major exporters are at 12 year lows and near the all time record low seen in 2007/08.  Stocks to use show the residual amount of wheat left after all consumption is taken into account.  The lowest S:U recorded in 2007/08 coincided with a global drought and spiked a commodity boom that saw CBOT hit 1300c/bu.

The USDA report has Australian wheat production at 29mmt, which given the current dry conditions across SA & WA, could be a stretch. The USDA also pegs EU27 at 132mmt, whereas Stratégie Grains forecasts 122mmt. Were the USDA’s numbers to be revised lower in the future, it could make for a very interesting market.

The wheat market has worked its way higher over a relatively short period of time and we’ll now enter a period where it (the participants) will try to determine if it is fairly priced. Weather is going to have a major influence on how much higher the market will go. Russian production is being ratcheted down with frost damage often not being fully understood until the headers come out.

Next week

In the absence of any more bullish inputs, expect the wheat market to give back some of these gains. If these highs can be sustained, it will need the world’s consumers to start to re-engage the market..

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Data sources: SovEcon, Reuters, USDA, IKAR, Next Level Grain Marketing, Mecardo

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To start the week, the wheat market got a very nice little push courtesy of Russian frosts, a bullish USDA report and technical short covering.

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