Another week, another very mixed result. Last week, Middle Eastern politics drew the market's attention, this week it's all about the weather.
Russia looked to receive some very welcome precipitation across the dry
North and South Caucuses (basically the key southern winter wheat region). It
was the building moisture deficits that had been starting to rally the
wheat market and causing some market participants to offset their short/sold
positions. The forecast of rain and the potential to resurrect the Russian crop
was enough to see a round of profit-taking amid a
belief that the market would be sold off.
However, weather forecasts have a nasty habit of changing. The promised rain event was a fizzer with only 5-10mm falling across the
region and failing to address the building deficits. The forecast –
depending on which model you look at – doesn’t call for any more rain
for at least the next week either. It feels like it is only a matter
of time before we start to see more significant cuts to Russian production.
French wheat is also facing an uphill battle. After a reasonably dry couple of weeks, the
weather is turning decidedly wetter again. This is a case of too much moisture
across Europe’s largest wheat producer. The French crop is now rated 63% good
to excellent compared to 90% a year ago. Also interesting
to note that MATIF market participants (spec/fund managers) are now net
LONG/BOUGHT wheat – essentially a ‘bet’ that that market will continue to rise.
The last bit of ‘weather’ news to hit the wires last night was the
extreme weather in Brazil’s Rio Grande du Sol region. The region has been
saturated by 12-20 inches of rain in the past month with forecasts calling for an additional 12 inches in the next ten days. The area is one
of Brazil’s key soybean-growing regions with approximately 30% left to be
reaped. This could amount to 7mmt of beans at risk. The soybean market flew out
of the blocks last night, helped by the potential
also for the US seeding pace to slow down after the passage of a very wet
couple of days. The support to beans also flowed through to canola which
enjoyed solid gains in both ICE (Canada) and MATIF (European) markets.
The thing about the weather market is that it tends to jump at shadows.
The threat of production cuts before the event and while there is time for the crop to stabilise adds an enormous amount of volatility to the
market. It can also be a time of great opportunity to price or hedge your crop.
Next week
Maybe it should be a source of comfort that weather is as unpredictable in other parts of the world as it is here. The weather market is going to throw the odd curve ball at us for the next couple of weeks as we grapple with how it will ultimately affect total production.
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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Time to cut the BOM some slack
Russia looked to receive some very welcome precipitation across the dry North and South Caucuses (basically the key southern winter wheat region). It was the building moisture deficits that had been starting to rally the wheat market and causing some market participants to offset their short/sold positions. The forecast of rain and the potential to resurrect the Russian crop was enough to see a round of profit-taking amid a belief that the market would be sold off.
However, weather forecasts have a nasty habit of changing. The promised rain event was a fizzer with only 5-10mm falling across the region and failing to address the building deficits. The forecast – depending on which model you look at – doesn’t call for any more rain for at least the next week either. It feels like it is only a matter of time before we start to see more significant cuts to Russian production.
French wheat is also facing an uphill battle. After a reasonably dry couple of weeks, the weather is turning decidedly wetter again. This is a case of too much moisture across Europe’s largest wheat producer. The French crop is now rated 63% good to excellent compared to 90% a year ago. Also interesting to note that MATIF market participants (spec/fund managers) are now net LONG/BOUGHT wheat – essentially a ‘bet’ that that market will continue to rise.
The last bit of ‘weather’ news to hit the wires last night was the extreme weather in Brazil’s Rio Grande du Sol region. The region has been saturated by 12-20 inches of rain in the past month with forecasts calling for an additional 12 inches in the next ten days. The area is one of Brazil’s key soybean-growing regions with approximately 30% left to be reaped. This could amount to 7mmt of beans at risk. The soybean market flew out of the blocks last night, helped by the potential also for the US seeding pace to slow down after the passage of a very wet couple of days. The support to beans also flowed through to canola which enjoyed solid gains in both ICE (Canada) and MATIF (European) markets.
The thing about the weather market is that it tends to jump at shadows. The threat of production cuts before the event and while there is time for the crop to stabilise adds an enormous amount of volatility to the market. It can also be a time of great opportunity to price or hedge your crop.
Next week
Maybe it should be a source of comfort that weather is as unpredictable in other parts of the world as it is here. The weather market is going to throw the odd curve ball at us for the next couple of weeks as we grapple with how it will ultimately affect total production.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: SovEcon, CRM Agri, Next Level Grain Marketing, Refinitiv, 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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It’s a bit of an understatement to say there is a bit going on in grain markets at the moment. Here we’ll cover price and
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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.