Wheat is a forgotten casualty in global strife

Something like 20 hours of talks and negotiations were held at high levels in London to try and bring trade between the world’s two largest economies back from the brink. The rapid escalation of tariffs and barriers that were introduced recently has met a kind of impasse where neither side can easily back down. The key sticking point for the US was access to Chinese rare earth minerals essential in the manufacture of vehicles (especially EVs), hi-tech military systems, and computer hardware. The agreed framework now allows more open export channels of rare earths into the US in return, China gets access to US micro-chips and aircraft components. Tariffs are still in place, with Chinese imports subject to 55% duties and US imports into China a more moderate 10%.

Disappointingly for US farmers and global traders, it seemed that agriculture barely rated a mention in the talks.

Last night, the USDA released its June report. Not normally a game changer, the USDA surprised a few by cutting wheat world ending stocks by 3 mmt on reduced stocks (mainly Russia) and higher exports. Somewhat counterintuitively, wheat prices sagged on the report release, casting some doubt on whether the trade actually believes the numbers. Global wheat stocks have been declining for 6 straight years, yet the moves in CBOT seemed to focus on the fact that production in the major exporters was held steady with EU27 137 mmt (+10 mmt on last year), Russia 83 mmt, and Canada 36 mmt unchanged from last month.

Growers of GM canola will be enjoying the rally in Winnipeg (ICE) canola futures. Despite some softening in global oilseed values, Canadian canola seems to be trading its own tightening fundamentals as dry conditions cause concern for the 2025 season. The moves here seem at odds with the bigger picture especially when you consider soybean supplies, trade issues between the US and Canada, and the looming Chinese investigation into anti-dumping practices.

Politics are never far from global trouble, and in the last few hours, Israel has launched an aerial attack on Iran. The pretext of the strikes was to destroy any capability Iran had of becoming a nuclear-armed country. This new front in a Middle Eastern dispute will likely cause crude oil to spike, and we are also likely to see some major shifts in the USD against other currencies.