Adding to the market’s concern, dry conditions contributed to low river levels, making barge navigation difficult. This was at a time when China was an active buyer of Brazilian beans and meal. As such, China has switched origins to the US which lit the fire under the CBOT soybean market. What does wheat have to do with soybeans? No direct correlation other than in ag markets, a rising tide tends to lift all boats.
Fast forward a few days, the rain forecast across Brazil gained traction, and the tide turned lower. The same old market drivers came to the forefront again, leaving the wheat market little option other than to revert to a well-worn path.
Australian new season grain is starting to hit the waves. Much of the early business will be barley headed for China. It is thought (hoped) that China will buy most if not all of our exportable surplus of barley, marking a welcome return to our most im-portant trading partner. This provides excellent underlying demand in the barley market and should be a positive influence on prices after the harvest surge.
Argentina, the southern hemisphere’s other problem child, also clipped their wheat outlook. The Rosario Grain Exchange further cut production to 13.5mmt, with the USDA and Buenos Aires Exchange both sticking to 15.5mmt and 14.7mmt respec-tively. Early harvest points to yields achieving 1.25t/ha, whereas to achieve USDA produc-tion estimates, yields need to average 2.5t/ha. Yields are expected to improve as harvest moves south.
The wheat market is in a funny place. It can’t shake the downtrend due to plentiful nearby supply. The demand side of the equation should eventually add some much-needed balance, with Egypt in the market for 12mmt (+7% Y on Y) and Chinese trade relations improving. In the latest IGC report, total demand is expected to increase by 2%, mostly on gains in feed and industrial uptake. World stocks at the end of 2023/24 are seen dropping by 2% to 585mmt, a seventh consecutive year of tightening, including reductions for wheat (-6%), barley (-11%), and oats (-50%).
Soybeans pull the plug
Next week
The market will be heavily focused on the forecast rain in Brazil and whether it falls where needed. Australian rain is also forecast along the East Coast which would help summer crop sowing in Southern QLD and Northern NSW, however, it could be poor timing for farmers trying to get their winter crops off.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: Reuters, International Grains Council, Next Level Grain Marketing, Mecardo
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