Light at the end of tunnel possibly a train

The report printed lower production and ending stocks for wheat – which should have been bullish.  This was overshadowed by the record corn production figure and a large increase (+1 million acres) in soybean area.  The soybean production figures were eye-watering for the US and added a negative sentiment to the week as the trade weighed up burgeoning stocks and subdued Chinese demand.

You could point the finger at any number of reasons why the wheat market ‘should’ rally. They range from poor quality issues in Western Europe, Russian production getting trimmed slightly, and mixed early Canadian yields. But it is the demand side of the equation that is ultimately dragging the market lower. Case in point, this week Egypt tendered for 3.8mmt of wheat and ended up only buying 280kmt. Turkey maintains its import ban, resulting in building Russian stocks and forecast EU demand is thought to be lacking due to poor quality.

Somewhat in conflict with the above, the USDA did increase world consumption to a record 804mmt based on higher feed use, leaving carryout at 257mmt – or 30% stocks to use. While global stocks are getting tighter, it is the fact that consumers globally are only purchasing hand to mouth and pushing exportable surplus’ deeper into the marketing year. This is weighing on the market and is a point that should give Australian farmers some concern over our potential harvest values going forward.

Unfortunately, there does not seem to be too much to get excited about for wheat pricing. Last night there was another missile attack on the Ukrainian port of Odessa. The market simply shrugged it off. There is still a lot of water to go under the bridge before our harvest, and the fact that stocks are getting tighter could become the spark that drives futures higher … eventually.