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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Russia ramping up exports
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
Click on graph to expand
Data sources: Reuters, USDA, Next Level Grain Marketing, Mecardo
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