In the past week, wheat prices have come under considerable pressure as talks progressed on news of a proposed ‘humanitarian corridor’ through the Black Sea. This week, the market rebounded strongly after news emerged that Russia bombed the Ukrainian port of Mykolaiv on the Black Sea over the weekend. The trade are now dubious that the recent rhet-ric of ‘unhindered’ exports is in fact a smoke screen to delay further sanctions
The talks between Russia and Turkey (a Ukraine representative was not invited) were a non event. Russian demands of reduced sanctions and de-mining the Black Sea were offset by Ukrainian concerns that this would simply allow Russian attacks by sea. Turkey has offered to provide naval escorts, but the reality is that a de-mining exercise would take 2-3 months to complete and does nothing to allay Ukrainian concerns.
Recent rains of 15-30mm through Ukraine has helped crop prospects there, but a quick look at rainfall in the critical southern Russian wheat areas shows a deficit building. Combined with higher temperatures, it is thought that stress is building in those crops leading into grain fill. SovEcon are still estimating a Russian crop of 88mmt with exports over 42mmt. The realisation of exports totalling in excess of 3mmt a month will depend on whether buyers can access Rubles and whether the trade can find shipping lines willing to take the risk. The US has ‘warned’ about 14 North African nations that the “Russian” wheat they are buying may in fact be Ukrainian. However, morals might take a back seat when people are hungry.
US winter wheat harvest has started at 6% complete. The sample size is probably not big enough yet to draw any conclusions about deviations away from ‘average’ yields, but information to hand suggests that yields will be highly variable.
While the sum of all this ‘bad news’ around wheat and an impending food crisis, the fact is (on paper at least) there is enough wheat to go around. Russia will again be the bench mark for global pricing, this time without the hinderance of export quota’s. Assuming no ‘humanitarian corridor’, how does Ukraine export this season? Slowly – and this should help to keep prices up.
The week ahead….
A USDA report due out over the weekend should provide some direction for the market. The trade is expecting a bullish reduction in corn acres, but a relatively unchanged wheat and bean stock position. Rain forecast through the Canadian Prairies will be a bearish influence if it materialises as expected.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its December Crop Report last week, and it came with some serious bumping
Another ‘geopolitic’ type of week, with little fundamental news but lots of political intrigue to keep the market ticking over. News that the US President
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Russians bomb Mykolaiv, Grain exports doubtful.
The talks between Russia and Turkey (a Ukraine representative was not invited) were a non event. Russian demands of reduced sanctions and de-mining the Black Sea were offset by Ukrainian concerns that this would simply allow Russian attacks by sea. Turkey has offered to provide naval escorts, but the reality is that a de-mining exercise would take 2-3 months to complete and does nothing to allay Ukrainian concerns.
Recent rains of 15-30mm through Ukraine has helped crop prospects there, but a quick look at rainfall in the critical southern Russian wheat areas shows a deficit building. Combined with higher temperatures, it is thought that stress is building in those crops leading into grain fill. SovEcon are still estimating a Russian crop of 88mmt with exports over 42mmt. The realisation of exports totalling in excess of 3mmt a month will depend on whether buyers can access Rubles and whether the trade can find shipping lines willing to take the risk. The US has ‘warned’ about 14 North African nations that the “Russian” wheat they are buying may in fact be Ukrainian. However, morals might take a back seat when people are hungry.
US winter wheat harvest has started at 6% complete. The sample size is probably not big enough yet to draw any conclusions about deviations away from ‘average’ yields, but information to hand suggests that yields will be highly variable.
While the sum of all this ‘bad news’ around wheat and an impending food crisis, the fact is (on paper at least) there is enough wheat to go around. Russia will again be the bench mark for global pricing, this time without the hinderance of export quota’s. Assuming no ‘humanitarian corridor’, how does Ukraine export this season? Slowly – and this should help to keep prices up.
The week ahead….
A USDA report due out over the weekend should provide some direction for the market. The trade is expecting a bullish reduction in corn acres, but a relatively unchanged wheat and bean stock position. Rain forecast through the Canadian Prairies will be a bearish influence if it materialises as expected.
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Click on graph to expand
Click on graph to expand
Data sources: Reuters, Mecardo
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A good WA spring driving crop production
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its December Crop Report last week, and it came with some serious bumping
Price pressure as production picks up
A week or so ago, I wrote how ‘big crops get bigger’. True to form, the trend continues. This week, StatsCan updated their production data
A slow harvest and drifting prices
Summer is here, yet it has been hard to find spring heat in the south, let alone summer. Cool, wet conditions continue to delay harvest
Thanksgiving caps a flat week
Another ‘geopolitic’ type of week, with little fundamental news but lots of political intrigue to keep the market ticking over. News that the US President
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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.
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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.