US wheat field rain

Wheat is doing something highly unusual. It is going up. Having withered on the vine for the best part of 12 months, wheat has finally found a bid.

Following on from some flash sales last week, China has continued this theme and is believed to have bought over 1mmt of US SRW and some HRW to light a flame under CBOT bids. This business, assuming it is executed, will keep US wheat inventories reasonably tight until a new crop.


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 their positions.

Next week

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.

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Data sources: Reuters, SovEcon, Next Level Grain Marketing, Mecardo

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