Jeopardy – the wheat edition

Another tough week in the wheat markets. How long and low can they fall? The script reads that a huge Russian stockpile, frenetic export pace, and cheap offers are the reason.

There is a lot of selling pressure coming out of Europe and the Black Sea as new-season wheat hits the pipelines. Eventually, these sources will slow up their export pace which gives me reason to think that this oversold market is ripe for a bounce.

Is it going to have to take something calamitous to right this ship? Or will time and the natural order of things see this market regain some strength? The failure of the grain corridor wasn’t enough. The ongoing conflict in the Black Sea …. pfft whatever. Drought in North America… no worries. The USDA cut a ‘mere’ 7mmt tonnes from global production this week…barely a ripple.

Those on the bullish side of the equation point to deteriorating pro-duction in Canada and Australia. Actual figures are yet to be realised but most of the as-sumptions are already priced into the market. On paper, major exporter stocks are getting tighter. Outside of China, major exporter stocks are penciled in at 54mmt, or 13.5% stocks to use. This is getting reasonably tight. Maybe the world’s markets are simply getting better at trading and making use of food and feed alternatives.

European wheat values were also under pressure. EU27 exports are down 32% from this time last year due to heavy Russian competition and the inflow of Ukrainian wheat across the borders.

The USDA report this week didn’t hold too many surprises other than the cut to wheat production, largely in the major exporter group. Corn-ending stocks were bumped up above 2B bushels, well into the comfortable range. Soybeans saw produc-tion trimmed and carryover stocks also reduced which has led to a modest bounce in futures, spilling into the wider oilseed market.