Wheat markets have been under pressure the past week as building US wheat production trumped the USDA report that showed global wheat stocks shrinking by 1mmt to 262mmt. It is a strange paradigm, where a benchmark publication highlighting tighter end stocks results in falling prices.
To be fair, the July WASDE report was pretty benign for wheat, with most of the observations within expectations. The report did mention ongoing bullish themes, including robust US exports and bio-fuel demand. It was, however, the talk of favourable weather, sluggish demand, tariff uncertainty, and overall economic headwinds that kept wheat prices under pressure.
The report highlighted a small increase in Russian production (with a corresponding increase in exports) but lower production estimates for both Ukraine and Canada. Perhaps the one key element that I took to be debatable was the unchanged production figure of 142mmt for China. This compares to 140.1mmt last season and means the Chinese farmer has managed to lift yields from 5.92t/ha to 6.02t/ha despite adverse weather conditions.
It wouldn’t be a weekly grain market comment without mentioning tariffs. The US President unveiled a raft of new tariffs on an increasingly alienated world last weekend, including 50% on Brazil, 35% on Canada, and 30% on the EU and Mexico. The tariff notification delivered in style via a fancy letter also threatened to raise aforementioned tariffs if the affected country had the temerity to impose its own reciprocal tariffs. These are due to come into effect on 1st August, leaving not much time for any last-minute deals.
But in something of a coup for the President, a new trade deal was signed with Indonesia, which includes an increase in US wheat exports. The Indonesian Flour Mills Association (APTINDO) has agreed to import 1mmt of US wheat annually from 2026 to 2030 as part of a new trade deal to stave off more burdensome tariffs. The US has been a regular supplier of wheat to Indonesia, averaging around 480kmt for the last 4 years. How this impacts Australia’s 4.2mmt export program remains to be seen, with Canada, Argentina, and the Black Sea also regular suppliers of wheat.
Speaking of deals, news that several loads of Australian canola are destined for China for ‘testing’ has raised hopes that a multi-year ban on Australian origins will soon be lifted. Evidently, Australian and Chinese officials are finalising protocols to meet Chinese phytosanitary requirements around the presence of ‘blackleg’ fungus. While not yet confirmed, Canadian canola futures dropped sharply on the news in anticipation of further sanctions stemming from Beijing’s anti-dumping probe.
Next week
Trade deals – or lack of them – continue to push and pull the ag market. The lead-up to 1st August is going to be very interesting.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its December Crop Report last week, and it came with some serious bumping
Another ‘geopolitic’ type of week, with little fundamental news but lots of political intrigue to keep the market ticking over. News that the US President
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Make it make sense
To be fair, the July WASDE report was pretty benign for wheat, with most of the observations within expectations. The report did mention ongoing bullish themes, including robust US exports and bio-fuel demand. It was, however, the talk of favourable weather, sluggish demand, tariff uncertainty, and overall economic headwinds that kept wheat prices under pressure.
The report highlighted a small increase in Russian production (with a corresponding increase in exports) but lower production estimates for both Ukraine and Canada. Perhaps the one key element that I took to be debatable was the unchanged production figure of 142mmt for China. This compares to 140.1mmt last season and means the Chinese farmer has managed to lift yields from 5.92t/ha to 6.02t/ha despite adverse weather conditions.
It wouldn’t be a weekly grain market comment without mentioning tariffs. The US President unveiled a raft of new tariffs on an increasingly alienated world last weekend, including 50% on Brazil, 35% on Canada, and 30% on the EU and Mexico. The tariff notification delivered in style via a fancy letter also threatened to raise aforementioned tariffs if the affected country had the temerity to impose its own reciprocal tariffs. These are due to come into effect on 1st August, leaving not much time for any last-minute deals.
But in something of a coup for the President, a new trade deal was signed with Indonesia, which includes an increase in US wheat exports. The Indonesian Flour Mills Association (APTINDO) has agreed to import 1mmt of US wheat annually from 2026 to 2030 as part of a new trade deal to stave off more burdensome tariffs. The US has been a regular supplier of wheat to Indonesia, averaging around 480kmt for the last 4 years. How this impacts Australia’s 4.2mmt export program remains to be seen, with Canada, Argentina, and the Black Sea also regular suppliers of wheat.
Speaking of deals, news that several loads of Australian canola are destined for China for ‘testing’ has raised hopes that a multi-year ban on Australian origins will soon be lifted. Evidently, Australian and Chinese officials are finalising protocols to meet Chinese phytosanitary requirements around the presence of ‘blackleg’ fungus. While not yet confirmed, Canadian canola futures dropped sharply on the news in anticipation of further sanctions stemming from Beijing’s anti-dumping probe.
Next week
Trade deals – or lack of them – continue to push and pull the ag market. The lead-up to 1st August is going to be very interesting.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Click on graph to expand
Data sources: Grain Growers, Rabobank, Reuters, SovEcon, USDA, Mecardo, Next Level Grain Marketing
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Have any questions or comments?
A good WA spring driving crop production
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its December Crop Report last week, and it came with some serious bumping
Price pressure as production picks up
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A slow harvest and drifting prices
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Thanksgiving caps a flat week
Another ‘geopolitic’ type of week, with little fundamental news but lots of political intrigue to keep the market ticking over. News that the US President
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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.
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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.