Stormy,Clouds,In,The,Rain

The market has tried a number of times to rally on news that the Australian and Argentinean crop is suffering from dry conditions.

One side of the market is pointing at the fact that global stocks to use (excl China) are at a pretty dismal 13% and major exporters are the ones facing the shortfall. The other side of the market is saying Russian wheat will fill all the gaps. It is a case of short-term supply surplus riding roughshod over the looming squeeze in available stocks.

It feels like the market will one day have to rally off these multi-year lows, but as I’ve discussed on here before, the fact it ‘should’ doesn’t mean it ‘will’.

Russia remains a major protagonist in the wheat market. The Ministry of Agriculture is trying to set higher floor prices, but importers are currently able to buy cheaper Russian origins through private sellers. It makes for a very confusing market-place. At the same time, Russia continues to target Ukrainian ports on the Black Sea further complicating wheat trades.

Ukrainian exports for August are down 51% year on year, highlighting the impact of the conflict. The fact that two vessels recently ran the gauntlet successfully does not immediately address hopes of a new ‘grain corridor’. I suspect it simply brings the ports in Odessa and Chornomorsk into the spotlight.

Southern Hemisphere production will soon dominate market wires. Argentina’s wheat belt has seen well below average rain for the past 30 days, except for the bullseye over arguably the region’s most dense wheat area of Cordoba. Much of the Buenos Aires region which accounts for 42% of the country’s wheat production has seen only 40-60% of average rainfall. There is still time to arrest any slide, but with crops around early tillering, any rain would want to be soon.

Lastly, all eyes will be on the rain event forecast for the East Coast of Australia. To say this would be a ‘million dollar’ rain would be an understatement. Dry conditions had been marching south through NSW and estimates were starting to be revised lower. A rain of 25-35mm would certainly shore up yields and help to stabilise Australian wheat production in the 23-25mmt range.

Next week

A rain in Australia will help to erase any questions over the exportable surplus. On the balance of probabilities, expect CBOT to weaken as risk is removed.

Have any questions or comments?

We love to hear from you!

Click on graph to expand

Click on graph to expand

Data sources: Reuters, SovEcon, USDA, Next Level Grain Marketing, Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Pulses lentils
Grains & Oilseeds

Performance from pulses

Faba beans have become a popular break crop in southern states, delivering not only a valuable export or feed commodity, but also giving nutritional benefits

Read More »
Grains & Oilseeds

USDA offers up a vanilla slice

Last night, the market rolled back on itself after the USDA printed a very vanilla April WASDE (World Ag Supply & Demand Estimates) report. With

Read More »
Grains & Oilseeds

USDA uncovers a big hole

Last week, I finished off the weekly market comment by saying “ Unless the USDA surprises with a sharper-than-expected reduction in corn area, I suspect

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
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.

Photo of a farmer surrounded by Merino sheep in dusty yards
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. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

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.