The market appears to be uncertain which direction to move. Early harvest results are mixed creating some uncertainty, but the arrival of new crop into the pipeline is providing an undoubtedly bearish influence. As a result, CBOT futures are relatively unchanged for the week.
Russia remains an enigma. Despite all the talk of damage to their
winter wheat crops, the early harvest results in the southern regions remain
better than expected. To that extent, respected analyst SovEcon raised Russian
production from 80.4mmt to 84.1mmt.
Russian and Black Sea origins dominated the last import tenders, with
FOB values having fallen significantly to stimulate demand. The same analyst is
also throwing in a line of caution citing low starting yields in the central
regions (albeit from a very small sample area)
which may drag overall yields down.
Rumours are also swirling that Russia may soon introduce minimum
pricing measures to prop up farmers’ returns. Last year would tell us that these measures rarely worked as
private exporters would routinely sell under the state-mandated minimum price floor.
Early harvest results in France have been underwhelming resulting in
MATIF rallying independently of CBOT. In particular, rapeseed has enjoyed a
buoyant couple of weeks, riding on the coattails of US soybeans but also the
prospect of lower overall production. This has seen Australian canola values
jump around $30-50/t (dependent on port zone).
Rainfall in some key areas is proving to be a case of too much or too
little. There are reports of some
moderate to severe flooding in central Canada resulting in some fields being
drowned out. It would be rare for entire paddocks to be washed out, rather low-lying ‘sloughs’ where the crop would be sitting in water for too long. Lentils are the crop that may be at most
risk, although canola and wheat may see some damage. In these situations, though, it is hard to see production changing too much with the
unaffected areas benefitting from the additional moisture balancing out the
losses.
Conversely, EU MARS (Ag Monitor) reports that 70% of Ukraine had its
driest May in 30 years. Coupled with very hot conditions currently, it will
bring forward harvest or limit the ability of later maturing crops to finish.
This will be interesting to watch as Ukraine has sown a larger area of oilseeds to maximise overall returns, so any
reduction could see a resultant kick in rapeseed/canola values.
Next week
It is clear that final global production is still up in the air. It won’t take too many production downgrades to cause prices to rally. On the flip side, if Russian production continues to see higher than expected yields, this will mute any upside moves while they remain an aggres-sive seller into the market.
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The wheat ride far from over
Russia remains an enigma. Despite all the talk of damage to their winter wheat crops, the early harvest results in the southern regions remain better than expected. To that extent, respected analyst SovEcon raised Russian production from 80.4mmt to 84.1mmt. Russian and Black Sea origins dominated the last import tenders, with FOB values having fallen significantly to stimulate demand. The same analyst is also throwing in a line of caution citing low starting yields in the central regions (albeit from a very small sample area) which may drag overall yields down.
Rumours are also swirling that Russia may soon introduce minimum pricing measures to prop up farmers’ returns. Last year would tell us that these measures rarely worked as private exporters would routinely sell under the state-mandated minimum price floor.
Early harvest results in France have been underwhelming resulting in MATIF rallying independently of CBOT. In particular, rapeseed has enjoyed a buoyant couple of weeks, riding on the coattails of US soybeans but also the prospect of lower overall production. This has seen Australian canola values jump around $30-50/t (dependent on port zone).
Rainfall in some key areas is proving to be a case of too much or too little. There are reports of some moderate to severe flooding in central Canada resulting in some fields being drowned out. It would be rare for entire paddocks to be washed out, rather low-lying ‘sloughs’ where the crop would be sitting in water for too long. Lentils are the crop that may be at most risk, although canola and wheat may see some damage. In these situations, though, it is hard to see production changing too much with the unaffected areas benefitting from the additional moisture balancing out the losses.
Conversely, EU MARS (Ag Monitor) reports that 70% of Ukraine had its driest May in 30 years. Coupled with very hot conditions currently, it will bring forward harvest or limit the ability of later maturing crops to finish. This will be interesting to watch as Ukraine has sown a larger area of oilseeds to maximise overall returns, so any reduction could see a resultant kick in rapeseed/canola values.
Next week
It is clear that final global production is still up in the air. It won’t take too many production downgrades to cause prices to rally. On the flip side, if Russian production continues to see higher than expected yields, this will mute any upside moves while they remain an aggres-sive seller into the market.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: Rabobank, MARS, SovEcon, Refinitiv, Next Level Grain Marketing, Mecardo
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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.
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