A big week in Ag markets. Sometimes, the good and the bad go hand in hand - nothing is simple, yet everything is entwined.
The week started with a bang when the USDA released their May report. All eyes were on the US wheat production figures, and the USDA surprised even the most bullish estimates by slashing the countries’ wheat output to 42.5mmt, the lowest since 1972 and a far cry from last year’s 54mmt. A combination of reduced acres and a drought, frost, and heat combination ripped the heart out of US Plains wheat. The corresponding WASDE report (global S&D) also surprised by forecasting a 25mmt reduction in global supplies with significant reductions coming from Australia, Argentina and the US. The market reacted by closing at a limit up move of 45c/bu.
The next focal point was the long-awaited meeting between Presidents Trump and Xi in Beijing. This was their first face-to-face since the escalation of the tariff war, and expectations were high for progress – both on trade and broader geopolitical tensions, including Iran and Taiwan. For ag markets, the key hope was that China might commit to increased purchases of US soybeans, a prospect that had already buoyed beans and the wider oilseed complex.
That optimism faded quickly. The post-meeting statement lacked any meaningful reference to additional soybean buying, prompting market participants to lose patience. Recent longs were unwound, and profits taken. Soybeans bore the brunt, pulling canola lower and weighing on the broader commodity complex, including wheat. By the close, wheat prices had retreated nearly 20c/bu from early-week highs.
With Northern Hemisphere harvest approaching, the recent rally has effectively priced US wheat out of many export markets, reopening the door for Russia and other Black Sea suppliers to set global pricing.
With the raft of ‘big’ data movers out of the way, the wheat market will take its lead from weather and geopolitical events. The conflict in Ukraine – while off the front page – does not look to be simmering down. Iran too, maintains its hold on the Strait of Hormuz and despite the US’ promise that everything is going well, means that the potential for higher energy costs is here to stay in the mid-term.
Next week
US crop scouts have been busy in the past week. Results are filtering through that HRW conditions – while bad – might not be as bad as the USDA printed. Expect wheat prices to stabilise with a dearth of new news.
The wheat complex has experienced a rather choppy few days, with systematic profit-taking shifting some of the heat out of the supply-squeeze-driven buoyancy we are
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The Good, The Bad & The Ugly
The week started with a bang when the USDA released their May report. All eyes were on the US wheat production figures, and the USDA surprised even the most bullish estimates by slashing the countries’ wheat output to 42.5mmt, the lowest since 1972 and a far cry from last year’s 54mmt. A combination of reduced acres and a drought, frost, and heat combination ripped the heart out of US Plains wheat. The corresponding WASDE report (global S&D) also surprised by forecasting a 25mmt reduction in global supplies with significant reductions coming from Australia, Argentina and the US. The market reacted by closing at a limit up move of 45c/bu.
The next focal point was the long-awaited meeting between Presidents Trump and Xi in Beijing. This was their first face-to-face since the escalation of the tariff war, and expectations were high for progress – both on trade and broader geopolitical tensions, including Iran and Taiwan. For ag markets, the key hope was that China might commit to increased purchases of US soybeans, a prospect that had already buoyed beans and the wider oilseed complex.
That optimism faded quickly. The post-meeting statement lacked any meaningful reference to additional soybean buying, prompting market participants to lose patience. Recent longs were unwound, and profits taken. Soybeans bore the brunt, pulling canola lower and weighing on the broader commodity complex, including wheat. By the close, wheat prices had retreated nearly 20c/bu from early-week highs.
With Northern Hemisphere harvest approaching, the recent rally has effectively priced US wheat out of many export markets, reopening the door for Russia and other Black Sea suppliers to set global pricing.
With the raft of ‘big’ data movers out of the way, the wheat market will take its lead from weather and geopolitical events. The conflict in Ukraine – while off the front page – does not look to be simmering down. Iran too, maintains its hold on the Strait of Hormuz and despite the US’ promise that everything is going well, means that the potential for higher energy costs is here to stay in the mid-term.
Next week
US crop scouts have been busy in the past week. Results are filtering through that HRW conditions – while bad – might not be as bad as the USDA printed. Expect wheat prices to stabilise with a dearth of new news.
Have any questions or comments?
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Data sources: Next Level Grain Marketing, Bloomberg, USDA, Reuters, Mecardo
Categories
Have any questions or comments?
Wheat waits for a trigger
The wheat complex has experienced a rather choppy few days, with systematic profit-taking shifting some of the heat out of the supply-squeeze-driven buoyancy we are
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Demand driving strong canola
Canola prices have bounced back to their recent highs and sit at levels not seen since 2022. Global supply remains solid, with perhaps some tightness
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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.
MEET THE TEAM
Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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.