Picture if you will, a rock climber, gradually, step by step, grasp by grasp, pulling themselves up the face of a sheer rock wall. This is what the wheat market has been doing this week, making small incremental climbs over the space of the past week, rising up from the multi-year lows seen in late August. Picture then, an impassable overhang in the way of the aforementioned rock climber. Such was last night's USDA September report to the wheat market.
The USDA printed a larger than expected wheat production number, thanks largely to a 2mmt increase to Australian production, now at 32mmt and now in line with ABARES 31.8mmt. Overall Australian exports are tipped to be around 25mmt. Global carryout was also increased by 0.6mmt, to 257.2mmt and above the average trade estimate of 255mmt.
The report was neutral to slightly bearish for wheat with the Dec ’24 contract erasing most of the overnight gains to finish mostly unchanged.
In the long term, it will be interesting to watch which way the wheat market trends. There is possibly a degree of support already being built into the market with a dry outlook for the winter wheat-growing regions of Russia. The sowing window is currently wide open, but the key Southern growing regions remain stubbornly dry. Winter wheat ideally is sown into warm soils with enough moisture to germinate and establish before the crop goes dormant over the winter period. A crop with poor establishment risks greater losses from winter kill should temperatures drop suddenly, or the crop does not have adequate snow cover.
The conflict in Gaza has probably overshadowed the war in and around the Black Sea. Last night a Russian missile hit a ship carrying Ukraine wheat. This might have prompted a sharp rally in the wheat market had this happened in the early days of the war. However, the news barely raised an eyebrow. The ship sustained minor damage and there were no reported injuries, with the vessel continuing its journey. It is a good reminder that the region is at best unstable.
Next week
With the Northern Hemisphere wheat harvest in the bin, attention will turn to Australian production over the critical Spring period as well as the winter wheat sowing program in the Black Sea.
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In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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Russia, USDA and a Rock wall
The report was neutral to slightly bearish for wheat with the Dec ’24 contract erasing most of the overnight gains to finish mostly unchanged.
In the long term, it will be interesting to watch which way the wheat market trends. There is possibly a degree of support already being built into the market with a dry outlook for the winter wheat-growing regions of Russia. The sowing window is currently wide open, but the key Southern growing regions remain stubbornly dry. Winter wheat ideally is sown into warm soils with enough moisture to germinate and establish before the crop goes dormant over the winter period. A crop with poor establishment risks greater losses from winter kill should temperatures drop suddenly, or the crop does not have adequate snow cover.
The conflict in Gaza has probably overshadowed the war in and around the Black Sea. Last night a Russian missile hit a ship carrying Ukraine wheat. This might have prompted a sharp rally in the wheat market had this happened in the early days of the war. However, the news barely raised an eyebrow. The ship sustained minor damage and there were no reported injuries, with the vessel continuing its journey. It is a good reminder that the region is at best unstable.
Next week
With the Northern Hemisphere wheat harvest in the bin, attention will turn to Australian production over the critical Spring period as well as the winter wheat sowing program in the Black Sea.
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Click on graph to expand
Click on graph to expand
Image Source: USDA
Data sources: SovEcon, USDA, Next Level Grain Marketing, 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.
Research: Analysis of the Australian sheep flock
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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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.