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.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its June Crop Report last week, which gives us the first look at
The past week has been dominated by geopolitics, which may have long-term ramifications for global trade. Firstly, President Trump got called out for rehashing his
You know the drought is getting serious when politicians start turning up on farms, making announcements. This drought is different from what the East Coast
Markets have chopped around either side of unchanged this week, not unexpected when con-sidering the abbreviated week from the US Memorial Day public holiday. Over
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Much ado about nothing (apologies to W Shakespeare)
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?
Click on graph to expand
Data sources: USDA, Reuters, Gro Intelligence
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Have any questions or comments?
Eastern and western wheat see production drop
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its June Crop Report last week, which gives us the first look at
Geopolitics, weather, and a wooden horse
The past week has been dominated by geopolitics, which may have long-term ramifications for global trade. Firstly, President Trump got called out for rehashing his
No drought premium for grain
You know the drought is getting serious when politicians start turning up on farms, making announcements. This drought is different from what the East Coast
Wheat is held in a rattled cage
Markets have chopped around either side of unchanged this week, not unexpected when con-sidering the abbreviated week from the US Memorial Day public holiday. Over
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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.