The wheat market has gone through the proverbial wringer in the past week. Having seen multiple ‘limit up’ days, the rubber band has finally snapped back, snatching back much of the gains seen in the past seven days.
It is hard to pinpoint the actual catalyst for the reversal of sentiment. Fundamentally the market can not keep going up indefinitely. The shock value of the initial Russian invasion has lessened as we gradually understand the implications of war and the logistical disruptions. And ultimately, Russian wheat is still being exported.
There is also a technical element to the moves in the wheat market. Since March 1, funds have been busy buying wheat futures and options. It is possible that the recent fall in prices has been due to a round of positions being liquidated i.e. profit taking. The CBOT May ’22 contract has fallen 18% from its highs in the past three days whereas the Dec ’22 contract has only fallen roughly 7%.
The USDA released their stocks report this week. Much of the news was already factored in and any news was largely drowned out by noise coming out of the Black Sea. Australian production was ramped up from 34mmt to 36.3mmt in line with ABARES. Aussie exports were also increased by 2mmt to 27.5mmt an all-time record. On the flip side, Ukraine exports are down 4mmt to 20mmt and Russian exports curbed by 3mmt to 32mmt.
Countries that traditionally buy Black Sea wheat (i.e. Middle East and North African nations) are going to need to source non-traditional origins to supply staples or otherwise pay exorbitant prices. Algeria bought 600kmt of wheat last night at an average price of US$485 (cost & freight) which using AUD conversion of 0.73c is roughly AU$660/t. In a bid to talk the market down, Egypt stated they had enough wheat to satisfy their requirements until Nov ’22. Expect them to announce a tender in the next few days.
The week ahead….
The focus will still remain on the Black Sea. The longer both parties remain in conflict, the more volatile the market will react. Beyond this, the spring plant and the harvest of winter sown crops will add further questions to an already stretched market.
Last week we looked at the Australian Bureau of Agricultural and Resource Economics and Sciences Crop Report, noting the strong growth in the forecast for
The seasons in the north and south couldn’t be more different in terms of rainfall and crop progression. While somewhat overshadowed by market movements, the
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.
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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.
USDA report fails to gain any headlines
It is hard to pinpoint the actual catalyst for the reversal of sentiment. Fundamentally the market can not keep going up indefinitely. The shock value of the initial Russian invasion has lessened as we gradually understand the implications of war and the logistical disruptions. And ultimately, Russian wheat is still being exported.
There is also a technical element to the moves in the wheat market. Since March 1, funds have been busy buying wheat futures and options. It is possible that the recent fall in prices has been due to a round of positions being liquidated i.e. profit taking. The CBOT May ’22 contract has fallen 18% from its highs in the past three days whereas the Dec ’22 contract has only fallen roughly 7%.
The USDA released their stocks report this week. Much of the news was already factored in and any news was largely drowned out by noise coming out of the Black Sea. Australian production was ramped up from 34mmt to 36.3mmt in line with ABARES. Aussie exports were also increased by 2mmt to 27.5mmt an all-time record. On the flip side, Ukraine exports are down 4mmt to 20mmt and Russian exports curbed by 3mmt to 32mmt.
Countries that traditionally buy Black Sea wheat (i.e. Middle East and North African nations) are going to need to source non-traditional origins to supply staples or otherwise pay exorbitant prices. Algeria bought 600kmt of wheat last night at an average price of US$485 (cost & freight) which using AUD conversion of 0.73c is roughly AU$660/t. In a bid to talk the market down, Egypt stated they had enough wheat to satisfy their requirements until Nov ’22. Expect them to announce a tender in the next few days.
The week ahead….
The focus will still remain on the Black Sea. The longer both parties remain in conflict, the more volatile the market will react. Beyond this, the spring plant and the harvest of winter sown crops will add further questions to an already stretched market.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Click on graph to expand
Data sources: USDA, CBOT, Reuters, AHDB
Categories
Have any questions or comments?
Changes to local wheat forecasts crunching basis
Last week we looked at the Australian Bureau of Agricultural and Resource Economics and Sciences Crop Report, noting the strong growth in the forecast for
Russia, USDA and a Rock wall
Picture if you will, a rock climber, gradually, step by step, grasp by grasp, pulling themselves up the face of a sheer rock wall. This
Contrasting crop production
The seasons in the north and south couldn’t be more different in terms of rainfall and crop progression. While somewhat overshadowed by market movements, the
China’s canola curve ball
The wheat market has enjoyed something of a bounce this week. Having briefly touched multi-year lows of 525c/bu for the Dec ’24 contract last week,
Want market insights delivered straight to your inbox?
Sign up to the mailing list to get regular updates to new analysis and market outlooks
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.
Research: Analysis of the Australian sheep flock
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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.