This weeks commentary is more about macro-economics and geopolitics that anything directly wheat oriented.
Having climbed to over 0.70USc, the AUD has tipped over in the past couple of trading sessions, to be around 0.695USc and a slight improvement for our cash prices. The change seems to be centred around Trumps new Fed Chair nominee, Kevin Warsh. The market appears to approve of the change with the USD rallying and notably the price of precious metals (a proxy for the USD when the economy is under pressure) falling sharply – signifying money flowing back to the Greenback.
Commodities more broadly are struggling to hang on to gains. Wheat had been rallying on cold-weather threats across the Black Sea region and parts of the US. For now, those risks appear to have passed with minimal damage (at least based on current information), prompting the market to ease off the panic button.
That said, in classic ‘weather market’ fashion, another cold snap has swept through Russia and Ukraine over the past few nights, with temperatures reportedly dipping as low as –30 °C in some areas. This has wheat prices probing higher again on perceived risk. SovEcon remains moderately bullish on the condition of Russia’s winter wheat crop, noting that adequate snow cover has largely shielded crops from the worst of the cold.
A similar story has played out in crude oil. Prices initially surged after President Trump ordered a substantial US naval deployment to the Middle East amid speculation of strikes on Iran. The Ayatollah responded by inviting China and Russia to participate in a rival naval exercise in the region. While the escalation rhetoric rattled markets, it appears to have pushed negotiators back to the table, calming tensions somewhat. Crude oil finished the week down around 4%.
Earlier in the week, the US and India signed a trade deal. Under the agreement, India has reportedly committed to reducing purchases of Russian oil in favour of US and Venezuelan supply, while the US will cut import tariffs from 25% to 18%. The deal is heavily centred on energy, while India potentially gains broader access to the US market. It follows closely on the heels of a Free Trade Agreement between India and the EU27, underscoring India’s growing economic and geopolitical importance.
The week ahead….
For now, it’s steady as she goes. With few fresh production stories to move prices, the market’s attention will remain on demand. As we move into March, traders will become increasingly sensitive to the development of Northern Hemisphere crops. Meanwhile, growing talk of volatile weather impacting South American corn and soybean production is firmly in the spotlight.
The surge in the energy sector has also spilled over into alternative fuels, primarily corn ethanol and biodiesel. If the conflict drags on, pressure will
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Macro take the wheel
Having climbed to over 0.70USc, the AUD has tipped over in the past couple of trading sessions, to be around 0.695USc and a slight improvement for our cash prices. The change seems to be centred around Trumps new Fed Chair nominee, Kevin Warsh. The market appears to approve of the change with the USD rallying and notably the price of precious metals (a proxy for the USD when the economy is under pressure) falling sharply – signifying money flowing back to the Greenback.
Commodities more broadly are struggling to hang on to gains. Wheat had been rallying on cold-weather threats across the Black Sea region and parts of the US. For now, those risks appear to have passed with minimal damage (at least based on current information), prompting the market to ease off the panic button.
That said, in classic ‘weather market’ fashion, another cold snap has swept through Russia and Ukraine over the past few nights, with temperatures reportedly dipping as low as –30 °C in some areas. This has wheat prices probing higher again on perceived risk. SovEcon remains moderately bullish on the condition of Russia’s winter wheat crop, noting that adequate snow cover has largely shielded crops from the worst of the cold.
A similar story has played out in crude oil. Prices initially surged after President Trump ordered a substantial US naval deployment to the Middle East amid speculation of strikes on Iran. The Ayatollah responded by inviting China and Russia to participate in a rival naval exercise in the region. While the escalation rhetoric rattled markets, it appears to have pushed negotiators back to the table, calming tensions somewhat. Crude oil finished the week down around 4%.
Earlier in the week, the US and India signed a trade deal. Under the agreement, India has reportedly committed to reducing purchases of Russian oil in favour of US and Venezuelan supply, while the US will cut import tariffs from 25% to 18%. The deal is heavily centred on energy, while India potentially gains broader access to the US market. It follows closely on the heels of a Free Trade Agreement between India and the EU27, underscoring India’s growing economic and geopolitical importance.
The week ahead….
For now, it’s steady as she goes. With few fresh production stories to move prices, the market’s attention will remain on demand. As we move into March, traders will become increasingly sensitive to the development of Northern Hemisphere crops. Meanwhile, growing talk of volatile weather impacting South American corn and soybean production is firmly in the spotlight.
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Data sources: Reuters, SovEcon, Next Level Grain Marketing, Bloomberg, Mecardo
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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.
MEET THE TEAM
Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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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.