Week on week, the wheat market has managed to stay pretty much exactly where it was - unchanged despite a raft of big data being released. The USDA’s World Agricul-tural Supply and Demand Estimates (WASDE) trimmed global corn stocks based on higher demand, but largely left wheat and soybeans unchanged. It is when you drill down into the data, that things don’t really make sense.
I have an unashamedly bullish view on the market…it’s just that the
market doesn’t necessarily agree with me. The latest USDA figures show us that
the global carryout of wheat continues to contract. The forecast for 2024/25
shows all wheat carryover at a 17-year low. All wheat stocks-to-use at 28% or
117 days of residual. If you take out Chinese stocks, believed to be around 52%
of the total, the major exporter stocks-to-use is getting very tight at 14%.
The story for corn is even more alarming in my opinion. The big dip in
global stocks has stocks to use at 11%, tallying only 42 days of residual
in-store.
These figures indicate that there is very little wriggle room in terms
of global production.
This is why the market will be watching what happens in Russia very
closely. This week, Moscow admitted that the Russian winter wheat crop is in
the poorest shape in decades. Late rains have not been able to make up for lost
time with 37% of the crop considered in poor condition and of that proportion,
a significant amount has not germinated. Talk that any failed winter wheat will
be resown to spring wheat is also being downplayed. Poor returns on the
lower-yielding spring wheats may see farmers opt for sunflowers or other
niche crops.
The threat of reduced Russian production ‘should’ be enough to get the
market going. Yet the net short (sold) positions in CBOT wheat futures and
options continue to approach record levels and weigh on the market. There is a
chance, that if the managed money crowd decides their view on the market has
changed, it could create a short, sharp rally as these positions are bought
back. I live in hope.
For now, with the Northern Hemisphere crop in the bin and the new
season crop entering dormancy, there will be little that fundamentals can do to
rock the boat. The crops in Australia and Argentina are mostly made with
limited time left for any surprises. The next couple of months will likely see
fairly flat trading barring any sudden shift in weather or a major escalation
in geopolitical violence.
Next week
I can make an argument for prices to lift into the New Year. Much will depend on how the Russian crop fares through winter. The Northern Hemisphere spring is when we could see some life breathed back into the wheat market. Best wishes for Christmas and the New Year.
Canola pricing has continued its rollercoaster price trend in recent weeks, as international values fluctuate on political announcements. Wheat has been much more benign, although
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In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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Make it make sense
I have an unashamedly bullish view on the market…it’s just that the market doesn’t necessarily agree with me. The latest USDA figures show us that the global carryout of wheat continues to contract. The forecast for 2024/25 shows all wheat carryover at a 17-year low. All wheat stocks-to-use at 28% or 117 days of residual. If you take out Chinese stocks, believed to be around 52% of the total, the major exporter stocks-to-use is getting very tight at 14%.
The story for corn is even more alarming in my opinion. The big dip in global stocks has stocks to use at 11%, tallying only 42 days of residual in-store.
These figures indicate that there is very little wriggle room in terms of global production.
This is why the market will be watching what happens in Russia very closely. This week, Moscow admitted that the Russian winter wheat crop is in the poorest shape in decades. Late rains have not been able to make up for lost time with 37% of the crop considered in poor condition and of that proportion, a significant amount has not germinated. Talk that any failed winter wheat will be resown to spring wheat is also being downplayed. Poor returns on the lower-yielding spring wheats may see farmers opt for sunflowers or other niche crops.
The threat of reduced Russian production ‘should’ be enough to get the market going. Yet the net short (sold) positions in CBOT wheat futures and options continue to approach record levels and weigh on the market. There is a chance, that if the managed money crowd decides their view on the market has changed, it could create a short, sharp rally as these positions are bought back. I live in hope.
For now, with the Northern Hemisphere crop in the bin and the new season crop entering dormancy, there will be little that fundamentals can do to rock the boat. The crops in Australia and Argentina are mostly made with limited time left for any surprises. The next couple of months will likely see fairly flat trading barring any sudden shift in weather or a major escalation in geopolitical violence.
Next week
I can make an argument for prices to lift into the New Year. Much will depend on how the Russian crop fares through winter. The Northern Hemisphere spring is when we could see some life breathed back into the wheat market. Best wishes for Christmas and the New Year.
Have any questions or comments?
Click on graph to expand
Data sources: SovEcon, USDA, Roger Wright, 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.
Research: Analysis of the Australian sheep flock
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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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.