Odessa,,Ukraine,-,August,9,,2021:,Loading,Grain,Into,Holds

Wheat has trended sideways for the week as the market looks for future direction. The general consensus is for continued pressure as Russia amps up its export program all the while their FOB values continue to fall.

The WASDE report out last week provided some distraction as the USDA both upped global wheat production (bearish) but also increased consumption (bullish). You could argue the report was bearish to neutral given US stocks were increased, but global stocks to use in the major exporters are at an 8-year low.

 

US wheat stocks were also given a wake-up call this week with China announcing further cancellations of US SRW wheat that was ‘purchased’ late last year. The total cancellation is running at 504kmt which will loosen up the SRW category considerably.

 

Australia is not exempt either. Thursday afternoon, news began circulating that China has cancelled or will postpone delivery of, at least 1mmt of Australian wheat. The wheat had been slated for export in the 1st quarter and has now either been cancelled outright or had the shipping slot pushed back into the 2nd and 3rd quarters.

 

The cancellations smell a lot like opportunity. World wheat prices have fallen back to 3.5 year lows or 14% since the start of 2024. I am not aware of too many other markets where you can simply walk away from a sale if the price moves against you (I am being very simplistic here) but I guess that is what market power can afford you.

 

These moves, perhaps not entirely unexpected, but disappointing nonetheless, will add to the lack of competitiveness of the rest of the world compared to Russia.  It feels like the wheat market has become a lot heavier suddenly.

Next week

The news of the cancellations will weigh on the wheat market in the short term. As I’ve said before though, falling prices will eventually flush out the buyers.

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Click on graph to expand

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

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