Much ado about nothing (apologies to W Shakespeare)

Golden,Wheat,Field,And,Sunset,Sky,,Landscape,Of,Agricultural,Grain

The past week has seen the wheat market rally on Black Sea tension. It has been a slow burn, but the potential for conflict is now headline news. Politicians, media experts, newspapers are all trumpeting the potential for war. And this is likely feeding the fire - keeping a risk premium building into wheat (and corn) markets. The last couple of days however, the market has begun to fall. There is no new news, diplomacy continues, the potential for conflict appears - despite the rhetoric - to be waning.

Perhaps confirming the de-escalation, a Belorussian official confirmed that Russia would withdraw all of its troops from Belarus after they had conducted their ‘war games’.

It’s hard to know what to think.  The presence of troops on your border would make anyone nervous. But as mentioned in last week’s article, We suspect this show of force is more about Russia and the US – and getting a better seat at the diplomatic table.

Despite the geo-political issues of late, good old fundamental movers are keeping a firm grip on corn and bean futures.  Weather in South America remains a key driver, with both corn and beans hitting multi season highs this week.  A return of hot and dry conditions, in particular in Argentina are worrying observers of the late sown corn crop.  The corn is at the critical silking stage and while this area had rain recently, stress at this time can have yield implications.  Gro Intelligence (US market analyst) has pegged Argentine corn production 27% below the current USDA’s estimate.

US demand is experiencing something of a golden period.  A combination of Black Sea risk, plus South American weather seems to have thrown more demand back to the US.  Most ag commodities experienced above expected exports last week.  China came back to buy new season soybeans and possibly some old crop corn.  China has not bought US corn anywhere the same volume as last year,  instead preferring to buy from Ukraine.  The recent uptick in purchases is possibly in response to the threat of military action in the area.

The week ahead….

We suspect the longer we go without conflict in the Black Sea, the market will retrace the premium it has built. 

Have any questions or comments?

We love to hear from you!
Print This Post

Click on graph to expand

Data sources: USDA, Reuters, Gro Intelligence

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!
Grains & Oilseeds

Jack tours Russia

To start the week, the wheat market got a very nice little push courtesy of Russian frosts, a bullish USDA report and technical short covering.

Read More »
Wheat plants _ image
Grains & Oilseeds

Benign May WASDE

It’s May and the new season World Agricultural Supply and Demand Estimates (WASDE) from the United States Department of Agriculture (USDA) is out. The WASDE

Read More »
Grains & Oilseeds

Weather bingo card

After the relatively quiet last few months where the ag commodity markets have drift-ed lower, the establishment of the weather market has seen a welcome

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.