Are we are witnessing a full blown fundamental rally, or a technical repositioning of short positions? The answer could be both, as one will lead the other. The fundamental nature of supply out the Black Sea versus the money managers willing to wager a falling price.
The problems being faced in the South and Central parts of Russia finally caught the markets attention this week, after weeks of hinting that there might be an issue. The final straw seems to be a declaration of a ‘state of emergency’ (SOE) in the state of Voronezh due to the drought. The SOE is declared so locals can apply for government support in the face of hardships. FOB prices in Russia have lifted to US$228, up $5/t since last week and the highest since July. Last night, some moisture appeared in the 7 day forecast, which might account for some of the softness we saw this morning. Beyond this, the forecast remains stubbornly dry, so the next few weeks will be interesting to watch whether this trend continues across the agricultural regions.
Another piece of the puzzle fell into place this week with consumers stepping up to the plate. Egypt has purchased a huge 3.1mmt of Black Sea wheat for Nov to April delivery. Saudi is also in the market for 295kmt for delivery into the Red Sea. Given the extremely volatile nature of the area, it will be interesting to see what price and who, is game enough to put their hand up. Attention will soon switch to Türkiye as their self administered import ban lifts on 15 October.
World peace took a turn for the worse this week with Israel attacking Lebanon and Iran retaliating with missiles into Israel. We are definitely in a Risk ON period. The main consequences seem to be a rally in crude oil prices and a run for safe haven assets, in particular the USD. The surge in oil prices is due to concerns over Israels ability to hit Iran’s oil assets. This offsets the news the Saudi wants to increase production which had been weighing on oil prices and conversely oilseeds. The rise in the USD will be welcomed by Australian producers and exporters as this should help with local cereal and oilseed prices. The reverse can be said for importers of things like urea – of which 70% comes from the Middle East – as we could see prices lift on both a weaker AUD and a strengthening natural gas price.
While all the bullish chips are on the table, the trade are still waiting for some solid consumptive demand to emerge for Aussie (well anything other than Black Sea) wheat in order to lift prices.
Next week
Crop scouts are out and about in Australian paddocks. It is still bit of
a mystery how much damage has been done in NSW due to the frost. Judging by the
tweets, it looks like it could be a lot but read our grains analysis earlier
this week for more on that. Rabobank were the first to cut their production
outlook, so expect more in the coming days and weeks.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released their September Crop Report last week. The good season to date across much
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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Welcome back Volatility, my old friend
Next week
Crop scouts are out and about in Australian paddocks. It is still bit of a mystery how much damage has been done in NSW due to the frost. Judging by the tweets, it looks like it could be a lot but read our grains analysis earlier this week for more on that. Rabobank were the first to cut their production outlook, so expect more in the coming days and weeks.
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Sources: SovEcon, Reuters, S&P Global, Next Level Grain
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Long, nervous and waiting
Despite a string of headlines that should, on the face of it, be supportive, the wheat market continues to trade in a relatively narrow range.
A good bump in winter crop production
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released their September Crop Report last week. The good season to date across much
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
Should we be selling wheat?
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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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.