The market is approaching seasonal lows as the weight of Northern Hemisphere harvest - nearly complete - rides precedent over rumours coming out of Canada, Australia and Argentina. There is a raft of conflicting pressures building in the wheat (and corn) market as unfavourable weather is trimming yield potential in these countries. Adding weight to the market is slowing economic conditions casting a shadow over the demand profile moving forward.
Last week, the market had been looking for a
potential Grain Corridor 2.0 after meetings with Erdogan and Putin were
scheduled. However, despite Erdogan’s best efforts to sway Moscow, an agreement
couldn’t be reached. Major financier and
reinsurer, Lloyds, stated after the decision (or lack thereof) that their
company would not consider an insurance scheme without the protection of a
ratified grain corridor.
The lack of a corridor is not affecting the
Russian export program. Russian
production was ratcheted up again this week to be now around 92mmt – the second
largest on record, coinciding with their largest ever exporting program set
last month. It highlights that Russia Is the world’s super power in wheat. The
Russian Gov’t has set a floor price of US$270/t FOB which is higher than most
of their European competitors. Egypt
(GASC) finally bought 480kmt of Russian origin wheat this week, having baulked
at the asking price in recent tenders.
Ultimately, the Black Sea remains the
barometer for wheat pricing. While Russian exports are flying out the door, the
price will remain under pressure. The US
can’t buy demand at these prices and the consumer is happy to take small bites
out of the enormous pile of Russian grain. Risks remain of course – Russia
seems hell bent on destroying port infrastructure along the Ukrainian coast
line, targeting the Danube port system for the fourth time in five nights. Should the Ukrainians target the Kerch Strait-
responsible for about 30% of Russian exports – be shut down, it would create a
huge supply issue.
We could make a case for wheat prices to
rebound over time. Canadian wheat production was recently cut by 4mmt to
29.5mmt down 14% year on year. ABARES has Australian production pegged at
25.4mmt down 33% from the 39.2mmt grown last year. Argentina is also dry across the key wheat
growing areas. While Russia is
dominating trade flows and prices today, I can’t help but wonder if Southern
Hemisphere production (and Canada) will tighten export stocks enough to add
some support.
Next week
Another USDA report will be coming out next week. It would be unlike the USDA to take a knife to the corn and bean yield estimates, but recent hot weather is likely to have done some damage. Whether the USDA’s number fall within the trades best guesses, will determine which direction the market trends.
Grain and oilseed markets are showing some good old-fashioned spring (in the northern hemisphere) volatility. We know that springtime dryness can grow into real production
Another week, another very mixed result. Last week, Middle Eastern politics drew the market’s attention, this week it’s all about the weather. Russia looked to
The worm seems to have turned somewhat in the grain and oilseed complex. While there is some short-term support coming from yet more geopolitical unrest,
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.
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.
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.
Seasonal Lows – calm before the storm?
The lack of a corridor is not affecting the Russian export program. Russian production was ratcheted up again this week to be now around 92mmt – the second largest on record, coinciding with their largest ever exporting program set last month. It highlights that Russia Is the world’s super power in wheat. The Russian Gov’t has set a floor price of US$270/t FOB which is higher than most of their European competitors. Egypt (GASC) finally bought 480kmt of Russian origin wheat this week, having baulked at the asking price in recent tenders.
Ultimately, the Black Sea remains the barometer for wheat pricing. While Russian exports are flying out the door, the price will remain under pressure. The US can’t buy demand at these prices and the consumer is happy to take small bites out of the enormous pile of Russian grain. Risks remain of course – Russia seems hell bent on destroying port infrastructure along the Ukrainian coast line, targeting the Danube port system for the fourth time in five nights. Should the Ukrainians target the Kerch Strait- responsible for about 30% of Russian exports – be shut down, it would create a huge supply issue.
We could make a case for wheat prices to rebound over time. Canadian wheat production was recently cut by 4mmt to 29.5mmt down 14% year on year. ABARES has Australian production pegged at 25.4mmt down 33% from the 39.2mmt grown last year. Argentina is also dry across the key wheat growing areas. While Russia is dominating trade flows and prices today, I can’t help but wonder if Southern Hemisphere production (and Canada) will tighten export stocks enough to add some support.
Next week
Another USDA report will be coming out next week. It would be unlike the USDA to take a knife to the corn and bean yield estimates, but recent hot weather is likely to have done some damage. Whether the USDA’s number fall within the trades best guesses, will determine which direction the market trends.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: Reuters, SovEcon, Next Level Grain Marketing
Categories
Have any questions or comments?
Getting good prices while avoiding volatility
Grain and oilseed markets are showing some good old-fashioned spring (in the northern hemisphere) volatility. We know that springtime dryness can grow into real production
Time to cut the BOM some slack
Another week, another very mixed result. Last week, Middle Eastern politics drew the market’s attention, this week it’s all about the weather. Russia looked to
Moving in the right direction
The worm seems to have turned somewhat in the grain and oilseed complex. While there is some short-term support coming from yet more geopolitical unrest,
Geopolitics and shorts weather
Amazing the difference a week can make. It all started last Friday morning, with continued escalations in the Middle East. The wheat market jumped 20
Want market insights delivered straight to your inbox?
Sign up to the mailing list to get regular updates to new analysis and market outlooks
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.
SERVICES AND CAPABILITIES STATEMENT BROCHURE
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.