Wheat head closeup in a field

The wheat market hit multi-month lows this week after continued pressure from cheap Black Sea supplies and relief in the form of rain across parched soybean fields in Brazil. The dip in the market has encouraged buyers out from under their collective rock

Last night the US markets were closed for their Thanksgiving public holiday.  The lack of direction saw other markets fall, in particular MATIF wheat and rapeseed. It will be interesting to watch buyer activity with China also reportedly sniffing around European origins.  The rise in currencies (Euro, AUD) against the fall in the USD is making it more difficult to compete against cheap Black Sea-origin wheat.

 Fortunately, there are signs that the rapidly rising Ruble is also having the effect of slowing down Russian exports.  SovEcon recently posted that the Russian wheat market appears to be bottoming out, giving some hope for a more equitable trading environment.

 As we can mount an argument for wheat prices to stabilise, the outlook for new season crops is also improving.  Recent rain across Europe has eased concerns over recently sown winter crops ahead of dormancy. In particular, areas of Southern Russia (export zone) have had excellent rains with more to come. Ukrainian farmers are reporting that the area sown to all winter crops will be down slightly from last year due to the effects of war but also a dry period during the sowing campaign that eroded confidence in the season ahead.

 Rain in Brazil, in particular the key growing state of Matto Grosso, has bought some time, but the coverage was spottier than a lot of farmers would have liked. The key to this year’s soybean crops will be in December/January when the crop is flowering and at pod fill.  At this point, some damage has been done and areas of abandonment may be higher than normal.  However, to put some context around this, Agroconsult (analyst) suggested this year’s crop could still reach record levels.  Expect a few more twists and turns before the year is out.

Next week

When the market returns after their Thanksgiving feast, demand will determine the direction the wheat market will take. I’d expect a little rally to reflect some new Chinese business.

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Click on graph to expand

Click on graph to expand

Data sources: Reuters, SovEcon, Agroconsult, Next Level Grain Marketing, Mecardo

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