The wheat market began the new year with more of a stagger than any kind of billion-dollar strut. We suspect the losses in market prices were more a round of profit-taking and position squaring ahead of, and now post, the festive season.
In the short term, the ag commodity markets have a lot of weather ahead that needs to be considered. We are likely to see elevated concerns around production given the tight nature of global stocks and this should give support to commodity prices as we navigate 2022.
Case in point, South America remains in the spotlight. Rains returned to some of the drier regions of southern Brazil but the forecast has again turned hot and dry. Key soybean producing states of Paraná and Rio Grande du Sol have already suffered irreversible yield losses. StoneX (prev FC Stone Intl) have slashed their production estimates from 144mmt to 135mmt. Industry analyst, AgResource more recently came out with a 131mmt production number. For reference, Brazils national analyst CONAB has production at 143mmt.
Black Sea crop prospects are pretty good with SovEcon increasing Russian wheat production estimates to 82mmt. It is an early crow but the season is progressing nicely after some recent rain and snow and temperatures relatively mild for this time of year.
The USDA released their crop condition updates yesterday. Most noticeable was the significant decline in crop health, especially through the key winter wheat states of Kansas and Oklahoma. For Kansas, just 33% of the crop was rated good/excellent with 25% rated poor/very poor. This compares to the previous month’s figures of 51% g/ex and 14% p/vp. Crop condition at this time of year has a poor correlation to final yield, but does place more emphasis on a kind spring. The US has been experiencing some pretty wild weather over the past couple of weeks, ranging from extreme wind, bush fires (in winter), tornadoes and blizzards.
Next week…..
It also looks like we will be dealing with some of the same macroeconomic issues in 2022 that we wrestled with through 2021. COVID-19 is still the elephant in the room, inflation, oil and energy prices, fertiliser cost etc etc. Throw in escalating geo-political tensions in the Black Sea, as well as China, could all make for a very interesting couple of months.
This weeks commentary is more about macro-economics and geopolitics that anything directly wheat oriented. Having climbed to over 0.70USc, the AUD has tipped over in
The final harvest reports are in, with further updates likely to offer minimal changes. Western Australia has received the promised bumper crop, while receivals on
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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.
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.
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.
New Year, old themes
In the short term, the ag commodity markets have a lot of weather ahead that needs to be considered. We are likely to see elevated concerns around production given the tight nature of global stocks and this should give support to commodity prices as we navigate 2022.
Case in point, South America remains in the spotlight. Rains returned to some of the drier regions of southern Brazil but the forecast has again turned hot and dry. Key soybean producing states of Paraná and Rio Grande du Sol have already suffered irreversible yield losses. StoneX (prev FC Stone Intl) have slashed their production estimates from 144mmt to 135mmt. Industry analyst, AgResource more recently came out with a 131mmt production number. For reference, Brazils national analyst CONAB has production at 143mmt.
Black Sea crop prospects are pretty good with SovEcon increasing Russian wheat production estimates to 82mmt. It is an early crow but the season is progressing nicely after some recent rain and snow and temperatures relatively mild for this time of year.
The USDA released their crop condition updates yesterday. Most noticeable was the significant decline in crop health, especially through the key winter wheat states of Kansas and Oklahoma. For Kansas, just 33% of the crop was rated good/excellent with 25% rated poor/very poor. This compares to the previous month’s figures of 51% g/ex and 14% p/vp. Crop condition at this time of year has a poor correlation to final yield, but does place more emphasis on a kind spring. The US has been experiencing some pretty wild weather over the past couple of weeks, ranging from extreme wind, bush fires (in winter), tornadoes and blizzards.
Next week…..
It also looks like we will be dealing with some of the same macroeconomic issues in 2022 that we wrestled with through 2021. COVID-19 is still the elephant in the room, inflation, oil and energy prices, fertiliser cost etc etc. Throw in escalating geo-political tensions in the Black Sea, as well as China, could all make for a very interesting couple of months.
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Data sources: Refinitiv, 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.
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.