Another week of roughly sideways trading in the wheat market. There have been some minor adjustments to crop size, but the weight of selling as the Northern Hemi-sphere farmer gets their cash flow needs met before Christmas, is largely keeping a lid on prices.
A report out of Moscow this week indicates that the Russian winter
wheat crop is in the poorest shape in decades. At 37% poor and only 31% good
(compared to 74% good last year) the crop will go into dormancy with a big
question mark hanging over its head. When you also consider the winter wheat
area is down somewhere between 600k and 1000k ha due to poor farm economics,
next year’s Russian wheat crop could be significantly smaller than what we’ve become used to.
Moscow has also confirmed that an export quota will be in place from 15
February until 30 June ’25. A maximum of 11mmt is to be exported compared with the 23mmt
exported during the same period last year. Assuming logistics allow, I would
expect that demand for Russian wheat will continue at pace in order to beat the
upcoming quota limits.
It’s funny how the market reacts to rumours, and then can have a complete counter-reaction to the actual
event. Buy the rumour, sell the fact. This week, the market caught a hint that
the Canadian crops would be revised higher. This caused some weakness in the
market, countering the Russian story. Last night, StatsCan published data
showing that both canola (-7%) and barley (-8%) were down significantly year on
year, and while wheat was up 6%, it was not as high as expected. Cue a nice
little rally in CBOT.
There is also talk that the Canadians are already factoring in the US
import tariffs as a given. To this end, it is thought that the canola area could suffer. There is a long time to go before the Canadian farmer has to finalise their cropping plans. A good rotation is good
risk management and good farmers know it is unwise to make future decisions
based on today’s prices.
Finally, Australian weather is in the news. It is thought that between 2.5 – 5mmt is at risk of downgrades due to harvest rain. This
tightens the amount of milling wheat available and increases the already over-supplied feed grains.
Next week
Wheat is trading potential for tighter supplies next year versus the ample supplies right now. The result is limited volatility and a relatively flat market. Watch for South American weather and reports on the condition of Russian crops to shift the market.
Canola pricing has continued its rollercoaster price trend in recent weeks, as international values fluctuate on political announcements. Wheat has been much more benign, although
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Wheat finely balanced as weather impacts milling wheat
A report out of Moscow this week indicates that the Russian winter wheat crop is in the poorest shape in decades. At 37% poor and only 31% good (compared to 74% good last year) the crop will go into dormancy with a big question mark hanging over its head. When you also consider the winter wheat area is down somewhere between 600k and 1000k ha due to poor farm economics, next year’s Russian wheat crop could be significantly smaller than what we’ve become used to.
Moscow has also confirmed that an export quota will be in place from 15 February until 30 June ’25. A maximum of 11mmt is to be exported compared with the 23mmt exported during the same period last year. Assuming logistics allow, I would expect that demand for Russian wheat will continue at pace in order to beat the upcoming quota limits.
It’s funny how the market reacts to rumours, and then can have a complete counter-reaction to the actual event. Buy the rumour, sell the fact. This week, the market caught a hint that the Canadian crops would be revised higher. This caused some weakness in the market, countering the Russian story. Last night, StatsCan published data showing that both canola (-7%) and barley (-8%) were down significantly year on year, and while wheat was up 6%, it was not as high as expected. Cue a nice little rally in CBOT.
There is also talk that the Canadians are already factoring in the US import tariffs as a given. To this end, it is thought that the canola area could suffer. There is a long time to go before the Canadian farmer has to finalise their cropping plans. A good rotation is good risk management and good farmers know it is unwise to make future decisions based on today’s prices.
Finally, Australian weather is in the news. It is thought that between 2.5 – 5mmt is at risk of downgrades due to harvest rain. This tightens the amount of milling wheat available and increases the already over-supplied feed grains.
Next week
Wheat is trading potential for tighter supplies next year versus the ample supplies right now. The result is limited volatility and a relatively flat market. Watch for South American weather and reports on the condition of Russian crops to shift the market.
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Click on graph to expand
Click on graph to expand
Data sources: SovEcon, Reuters, StatsCan, Next Level Grain Marketing, Bloomberg, Mecardo
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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.
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.
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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.