Having teased us with a brief rally, the market has fallen back to its old playbook - sell the forward months and clip the ticket on the way through. By this I mean, the technical traders are looking at the forward ‘carry’ - ie future months are more expensive than the current ‘spot’ month - and rolling their positions over and picking up the difference. It is a straightforward strategy and helps to keep a solid ‘sell’ in the market and puts pressure on any rally. Also, if you are a consumer, it disincentivises large forward purchases, as evidenced by the fact that end users are currently preferring to live hand to mouth, buying ‘spot’ and not further out the curve.
The wheat market has
become all about Russia. Russian export pace has seen records fall in August
and September, as non-traditional consumers keep picking up the phone. Even with the absence of Türkiye
and Kazakhstan, Russia has been busy picking up the slack with increased volume
into Egypt, Kenya,
Morocco, Nigeria and Vietnam.
However, the pace of
exports prompted a meeting last week with some of the major Russian traders and
the Russian Ag Ministry. There are concerns that the pace is not sustainable
and that measures need to be introduced to maintain a critical volume of grain
in surplus. The outlook for the 24/25 Russian winter wheat crop is no doubt
adding some pressure to their concerns.
As such, the Ag Min
has introduced a proposal to set price floors for all Russian wheat exports
going forward. The current price is to be lifted from US$233 to $240/t. In November, the price will increase
to $245/t and further to $250/t in December.
This will put Russian wheat parity with EU27 and Argentina and gives other exporters a chance to compete.
However, this will take time before we see some kind of convergence between
prices and origins. Next in line is Ukraine and some of the Balkan states which would be eager to
pick up on lost time.
It seems the world’s wheat supplies keep getting pushed
forward. The window for Aussie farmers and traders to sell at a premium
is getting smaller as competition is very tight for the demand that is there.
Barley is the other
crop that is struggling to find its place in the world. Chinese demand – believed to be around 10mmt
– has not yet emerged with Chinese traders content to watch the US election
unfold with a view the outcome could affect feed (corn) pricing. The Chinese have said they have a preference for
Aussie feed barley, but at current prices feel they should wait for harvest
pressure to take some heat out of the market.The slowing Chinese
economy has hit beer sales especially hard, with maltsters there signalling
they will buy the bare minimum malt and instead concentrate on FAQ grades.
Next week
Harvest has started in parts of Australia. The trade is taking a cautious approach, and we are likely to see prices retreat until we start to see global prices converge to stimulate demand outside of the Black Sea sphere of influence.
Wheat markets have been under pressure the past week as building US wheat production trumped the USDA report that showed global wheat stocks shrinking by
The July World Agricultural Supply and Demand Estimates (WASDE) Report produced by the United States Department of Agriculture (USDA) was much anticipated, with most pundits
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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.
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.
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.
Time is of the essence
The wheat market has become all about Russia. Russian export pace has seen records fall in August and September, as non-traditional consumers keep picking up the phone. Even with the absence of Türkiye and Kazakhstan, Russia has been busy picking up the slack with increased volume into Egypt, Kenya, Morocco, Nigeria and Vietnam.
However, the pace of exports prompted a meeting last week with some of the major Russian traders and the Russian Ag Ministry. There are concerns that the pace is not sustainable and that measures need to be introduced to maintain a critical volume of grain in surplus. The outlook for the 24/25 Russian winter wheat crop is no doubt adding some pressure to their concerns.
As such, the Ag Min has introduced a proposal to set price floors for all Russian wheat exports going forward. The current price is to be lifted from US$233 to $240/t. In November, the price will increase to $245/t and further to $250/t in December. This will put Russian wheat parity with EU27 and Argentina and gives other exporters a chance to compete. However, this will take time before we see some kind of convergence between prices and origins. Next in line is Ukraine and some of the Balkan states which would be eager to pick up on lost time.
It seems the world’s wheat supplies keep getting pushed forward. The window for Aussie farmers and traders to sell at a premium is getting smaller as competition is very tight for the demand that is there.
Barley is the other crop that is struggling to find its place in the world. Chinese demand – believed to be around 10mmt – has not yet emerged with Chinese traders content to watch the US election unfold with a view the outcome could affect feed (corn) pricing. The Chinese have said they have a preference for Aussie feed barley, but at current prices feel they should wait for harvest pressure to take some heat out of the market. The slowing Chinese economy has hit beer sales especially hard, with maltsters there signalling they will buy the bare minimum malt and instead concentrate on FAQ grades.
Next week
Harvest has started in parts of Australia. The trade is taking a cautious approach, and we are likely to see prices retreat until we start to see global prices converge to stimulate demand outside of the Black Sea sphere of influence.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: SovEcon, Reuters, Bloomberg, Next Level Grain Marketing, Mecardo
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
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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.
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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.