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.
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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Wheat finds its feet
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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Click on graph to expand
Data sources: Reuters, SovEcon, Next Level Grain Marketing, Mecardo
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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
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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
Black Sea bites back
Finally, we are starting to see the market react in a manner that many of us expected. For weeks, the wheat market largely shrugged off
Demand driving strong canola
Canola prices have bounced back to their recent highs and sit at levels not seen since 2022. Global supply remains solid, with perhaps some tightness
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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.
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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.