Russian wheat FOB values are also increasing which is lifting
the entire floor. This week, Egypt bought 120kmt of Russian origin and last
night a further 420kmt at higher values. Egypt also bought 60kmt of Ukrainian
wheat out of the Constantia port area near the Romanian border. This prompted a new round of drone strikes in
the area, reminding us all of the hazards of doing business in this area.
Adding some impetus to the recent strength in Black Sea
prices, Russian and Ukrainian exports have taken a hit over the past week as
storms caused damage to coastal areas and drove at least one ship ashore. This time of year, it is normal for export
volumes to dip as winter weather takes hold and limits logistics. How much
other origins will be able to fill the gap will be critical to price direction.
There has been a degree of short covering as the managed money
crowd exits some poorly positioned contracts.
If you recall, the speculators and fund managers held a record short
(sold) position in CBOT wheat acting as a proverbial millstone around the neck
of the market. Rather than a rush for the door, which can cause an explosive
rally, this rebalancing seems to be quite orderly. I suspect we’ll need to see
some further flash sales if we expect the market to continue moving
higher. A lull in demand will likely see
prices ease back and the managed money crowd take the opportunity to refresh
The fundamentals suggest that wheat stocks are gradually getting tighter. This should be supportive for prices as we head into 2024. Weakness in the global wheat cash market stems from the fact that the largest stockpiles are those closest to the buyer, keeping other origins at bay. As logistics make these supplies harder to access, it will also be positive for prices.