Stabilising Northern Hemisphere crops and improving Southern Hemisphere crops have provided very strong headwinds for the CBOT wheat contract. The US winter wheat crop is nearly in the bin and the spring crop is looking like it’s going to be a big one. Australian crop is being talked up to now being in the realms of 34mmt (USDA has it at 29mmt) and the Argentine crop has finished seeding in good conditions.
The absence of a number of importers from the market (Türkiye placed an
import ban at the end of June until at least October), has meant that Russia
has had to look for alternative destinations to prop up their export program. This has resulted with July shipments down 29% year on year. Similarly, good
domestic crops in Pakistan and Iraq have limited their appetite in the import market, pushing more exporters to
seek business in the SE Asian markets.
Western Europe is the bright light for those bullish on wheat.
Perpetually wet weather for the season has not let up during harvest, leading
to concerns of serious quality downgrades and losses. There is a perception
that eventually the market will have to start pricing at a premium for milling wheat as the EU27’s main milling wheat exporters
(France and Germany) are the ones most impacted by the wet weather.
One analyst is forecasting French wheat at 26mmt (the lowest in a century) but it is the quality profile that could have bigger knock-on effects.
There are reports that Baltic (Lithuanian, Latvian) wheat is being bought into
the MATIF (French) market as the French farmer is a very reluctant seller at
the current price levels.
The poor French crop is helping to prop up Russian farm gate values,
with prices recording a lift week on week.
Canada endured a tough couple of weeks with temps well above 30C for 8 consecutive days. This has resulted in crop conditions and available soil moisture reserves coming under considerable pressure, albeit from very high original levels. Overall crop conditions in Saskatchewan fell from 90% good-excellent to 75% and in Alberta, conditions dropped 13% to 60% good-excellent. While it has undoubtedly dropped some yield, overall production remains at the high end of expectations.
Wheat fundamentals remain quite bearish with sluggish demand coupled with building supply weighing on the market. Short-term, favourable weather in the US will keep investors pushing the button ahead of the row crop harvest.
Next week
Middle East tensions are being watched after a Hamas leader was assassinated in Iran. The prospect of the war in Gaza spreading beyond its borders could have implications for the price of oil as well as ocean freight through the region.
Another interesting week in global markets and politics. After making oddly specific threats of tariffs against China, Canada and Mexico in Trump’s first few hours
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Sacré bleu! French wheat worries.
Next week
Middle East tensions are being watched after a Hamas leader was assassinated in Iran. The prospect of the war in Gaza spreading beyond its borders could have implications for the price of oil as well as ocean freight through the region.
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Data sources: CRM Agri, Sask Wheat, USDA, Mecardo
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