Just when you thought the grain markets were stabilising, in the words of Brendan Dart (Dartboard Commodities), the “USDA rolled a hand grenade under the table”. The September stocks report came out late last week and blew everyone out of the water, with some significant adjustments which have left more than the odd person baffled.

Soybeans were significantly tighter than last year and below trade estimates as well.  This one might have been expected, as the managed money positions are a record LONG (bought contracts) indicating to me at least, that the spec crowd was expecting tighter stocks and higher prices.  This puts heavy emphasis on the South American crop and any weather/production scare could really rattle the market.

Corn also came in under trade estimates with the assumption being higher feed demand/consumption. The June’20 stocks report indicated a supply surplus of close to 3bbu, so something sub 2bbu makes it feel tight (it isn’t, but perception is everything).  Rumours are swirling that China has a corn issue so future demand will be closely watched.

Wheat was modestly tighter than the trade expected, but the ensuing rally made it seem like the world was running out of wheat.  It seems totally out of context with the large global supplies on hand, but there you go.  It seems to me that the market is factoring in either a) reduced acres in the dry Black Sea region, or b) reduced production leading into the 2021 season.  There is little to correlate a poor seeding period with a poor final production year.  In fact, a dry and warm winter period significantly helped Russia’s production last year.  Russian winter wheat is around 70% planted and on a similar pace to last year (a record fast pace).  The 10-day forecast remains dry and is a bull flag to watch.

The week ahead….

There is a lot to play out with South American production not to mention the Black Sea.  This rally will need some more bullish news to keep climbing, and a dry forecast could be just what it needs.  A change in the forecast will likely see a round of profit-taking.  Nevertheless, it is providing a nice opportunity for Aussie farmers to price leading into harvest.

Have any questions or comments?

We love to hear from you!

Click on graph to expand

Click on graph to expand

Data sources: USDA, Reuters, SovEcon, Dartboard Commodities, Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Grains & Oilseeds

Exporter weather in the spotlight

Grain markets continued to see support last week, with CBOT wheat (Dec’ 20) break-ing through key technical resistance of 600¢/bu. The strength of the rally

Read More »
Percentiles with a background image of hay bales

Percentiles – October 2020

Mecardo’s Percentiles update for October 2020. Click below to view the latest report Grains  Oilseeds Sheep and lambs Cattle Wool Dairy Fuel Percentiles are an important

Read More »
Grains & Oilseeds

Black Sea blues

Interesting that the global wheat market is focused on potential production problems next year, and seemingly forgetting about the record 773mmt crop this year. We

Read More »

Don’t have an account with us? Join free.

You can have full premium access to all of our content with a monthly or annual subscription. 

Alternatively, create a free account to access our Insights blog and two free premium article a month!

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
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 issues affecting the agricultural industry. 

WA sheep farmer looking at empty yards, photo by Chantel Mcalister
Research: Impact of the live sheep export moratorium

In this report for LiveCorp and MLA, we consulted with stakeholders in the sheep supply chain to identify the impact of the moratorium on the live sheep export trade.

Image of harvested grain pouring into a chaser bin

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.