The King is dead - Long live the King! The US election may be over, but I think the transition is going to be far from smooth. US equity markets have welcomed the result as have global currencies. Despite the election outcome, COVID is running rampant in the US, slowing the economy and weakening the USD.

This week saw the release of the USDA’s November WASDE report.  While some cuts to production and ending stocks were inevitable, the size of the move caught the market largely off guard.  Corn and beans both saw cuts to their yield estimates but also saw steep drawdowns of ending stocks.  In the case of corn, stocks were revised lower by 21% from the October estimate and exports increased by 14%.

Soybeans had a similar fate.  Cuts to production in both the US and Ukraine have dramatically tightened available stocks.  Stocks to Use in the US is now only 4% and as the residual supplier of beans, the US now faces the need to ration demand.

Wheat was a relative non-event.  Small, incremental cuts to production were noted.  Argentina down another 1mmt to 16mmt from an earlier estimate of 21mmt.  Russia increased by 0.5mmt to 85.5mmt.  Australia was left at 28.5mmt which raised some eyebrows.  Global ending stocks are comfortable on paper.  But when you remove China, stocks in the major exporters are around 62mmt, or 15% stock to use.    Recent estimates have Aussie production pushing 30-32mmt so there is potential for major exporter ending stocks to increase a little.

Earlier this week, Saudi Arabia’s state grain buyer SAGO confirmed it had bought 860kmt of wheat at its latest international purchasing tender. Both Australian and European wheat will form large chunks of the business, confirming Aussie wheat’s pronounced competitiveness at current pricing.  The 12.5% protein wheat was purchased at an average price of US$277.53/t cost and freight Saudi Arabia for Feb/March delivery which works back to about $310 port East Coast.

The Saudi tender was extremely well-timed after news that China was considering ‘widening’ its punitive attack on Australia by barring wheat.   This when the trade had been factoring in increased wheat demand from China.   This most recent tender will hopefully see the dust settle quickly and see our wheat find new homes.

Another week of good rains through key Russian ag areas has the crop improving ahead of winter.   There are a couple of areas that remain drier than they’d like, but overall, the crop is in reasonable shape.  Reports are suggesting this year’s winter wheat area is a record, casting a few questions on why the market traded higher on dry planting weather in the first place!

Commodity Conversations

Next week

The cuts to corn and soybean supplies should make it hard for wheat to break lower.  One would of caution, however.  Continued demand for wheat will need to be observed to maintain current prices.

Have any questions or comments?

We love to hear from you!

Click on graph to expand

Click on graph to expand

Data sources: USDA, Atria Brokers, Next Level Grain Marketing, Mecardo.

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
weather map
Grains & Oilseeds

Quick trip around the World

In the not so distant past, grain trading houses put huge emphasis on crop condition analytics, reports from ‘boots on the ground’ and anything else

Read More »
Grains & Oilseeds

V is for Volatility

May we live in interesting times – to paraphrase an ancient Chinese curse – seems particularly apt in commodity markets right now. The very strong

Read More »

Don’t have an account with us? Join free.

You can have full premium access to all of our content with a monthly or annual subscription. 

Alternatively, create a free account to access our Insights blog and two free premium article a month!

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
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.

Photo of a farmer surrounded by Merino sheep in dusty yards
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. 

Image of harvested grain pouring into a chaser bin

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.