The market did, however, sit up and take notice of reports that the US and China are deep in discussions aimed at a potential trade truce. Speculation is building that President Donald Trump’s visit to Beijing next month could usher in a renewed period of diplomatic and trade normalisation, largely absent over the past year. That narrative sparked a round of technical short-covering in wheat, pushing prices to a three-month high overnight.
Export demand remains robust. Several exporters are running ahead of the average seasonal pace. Canadian exports of around 11mmt for the marketing year are tracking close to 10% above last year, while Argentina – buoyed by a record crop – has already shipped more than 14mmt, compared with roughly 9mmt a year ago. Russian exports have slowed over recent months, which is typical during winter given weather and logistical constraints. Talk of an imminent Russian export quota may attract some attention, but it is worth noting this is an almost annual feature and rarely has lasting market impact.
Market focus will increasingly shift to Northern Hemisphere crop conditions as dormancy ends in late March and early April. This marks the onset of the traditional “weather market,” a period that can introduce additional volatility.
According to Russia’s Ministry of Agriculture, 97% of the Russian wheat crop is currently rated in good condition, compared with 84% at the same time last year. Early U.S. assessments similarly suggest crop conditions are better than a year ago. Satellite crop-health data from GeoLab Global also indicate that growing conditions as at late January remain broadly favourable across major producing regions. While much of the world’s wheat crop is still dormant, conditions are materially improved on last year’s baseline.
Ample supplies and comfortable inventories indicate that the global agri commodity market is well positioned to absorb any moderate shocks. That said, this stability should not be taken for granted as any supply or threat to production will see a rapid return to volatility.
Technical twist drives wheat
Next week
China and fair chunk of Asia are off next week for their Lunar New Year celebrations. Prices will likely dive during this period so it will be interesting to see where things pick up once everyone is back at work.
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Data sources: AMIS-FAS, Sask Wheat, USDA, Next Level Grain Marketing, Mecardo
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