Grain markets did an abrupt about face this week. After weeks of steadily rising, ag commodities led by wheat erased a month’s worth of gains. The catalyst appeared to be easing tensions in the Mid East - or at least the rhetoric dialed down a notch - and rains in the US Plains stabilising the crop.
One could argue that wheat was encroaching over bought territory. You need to feed the bulls every day, and the news that had driven the rally was getting a little old. For prices to continue pushing higher, the market needed a new production threat. With rain forecasts across Europe and the Black Sea region, there was little fresh weather concern to keep the rally alive.
The US HRW wheat conditions improved 1% to 31% good to excellent after rain helped to prevent further declines. In all likelihood, the good stuff is very good and the late rains will help add yield and weight. The bigger question remains just how poor the bad areas really are. Reports continue to emerge of crops being grazed out in western Kansas and Oklahoma. Wheat that has already been headed is unlikely to recover much, particularly with another round of cold overnight temperatures this week. The USDA drought monitor expanded the drought-affected area to 70%, which ordinarily would have lent some fundamental support to wheat, but broader macro forces dragged the market lower regardless.
Media reports this week gave the impression that the US was about to conclude its time in Iranian waters and call it good. An extension of ceasefire terms and little in the way of military action gave rise to thoughts that the Strait of Hormuz would be reopened. Crude oil gave up 10% over the week in anticipation that the maritime traffic would start to flow.
Alas.
Early this morning, with only a few hours of trading left, reports surfaced that the US fired on an Iranian oil tanker and Iran fired missiles at a number of US Navy vessels. Oil opened sharply higher but has since settled a little as a lack of follow up keeps markets on a ‘watch and act’ setting.
Next week
The weather pattern has made a shift towards drier conditions in the US and Australia. Fundamentally, wheat should be supported, however, the past week has shown that the macro environment still rules the roost.
Today is MATE Day (May 8). Reach out to a mate over a frothy or a quick call to check in. You never know how important that small gesture might be.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released it’s June Crop Report last week, and it looks like the energy crisis
International wheat markets continue to bounce around, looking for a level as the northern hemisphere harvest approaches. Locally price spreads have ballooned, but then it
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Oil Trumps Wheat
One could argue that wheat was encroaching over bought territory. You need to feed the bulls every day, and the news that had driven the rally was getting a little old. For prices to continue pushing higher, the market needed a new production threat. With rain forecasts across Europe and the Black Sea region, there was little fresh weather concern to keep the rally alive.
The US HRW wheat conditions improved 1% to 31% good to excellent after rain helped to prevent further declines. In all likelihood, the good stuff is very good and the late rains will help add yield and weight. The bigger question remains just how poor the bad areas really are. Reports continue to emerge of crops being grazed out in western Kansas and Oklahoma. Wheat that has already been headed is unlikely to recover much, particularly with another round of cold overnight temperatures this week. The USDA drought monitor expanded the drought-affected area to 70%, which ordinarily would have lent some fundamental support to wheat, but broader macro forces dragged the market lower regardless.
Media reports this week gave the impression that the US was about to conclude its time in Iranian waters and call it good. An extension of ceasefire terms and little in the way of military action gave rise to thoughts that the Strait of Hormuz would be reopened. Crude oil gave up 10% over the week in anticipation that the maritime traffic would start to flow.
Alas.
Early this morning, with only a few hours of trading left, reports surfaced that the US fired on an Iranian oil tanker and Iran fired missiles at a number of US Navy vessels. Oil opened sharply higher but has since settled a little as a lack of follow up keeps markets on a ‘watch and act’ setting.
Next week
The weather pattern has made a shift towards drier conditions in the US and Australia. Fundamentally, wheat should be supported, however, the past week has shown that the macro environment still rules the roost.
Today is MATE Day (May 8). Reach out to a mate over a frothy or a quick call to check in. You never know how important that small gesture might be.
Have any questions or comments?
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Click on graph to expand
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Data sources: Next Level Grain Marketing, Bloomberg, USDA, Reuters, Mecardo
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Sowing into uncertainty
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released it’s June Crop Report last week, and it looks like the energy crisis
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Wheat upside reliant on northern hemisphere
International wheat markets continue to bounce around, looking for a level as the northern hemisphere harvest approaches. Locally price spreads have ballooned, but then it
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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.
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.