For all the doomsday prophecies around the outlook for commodities, this week wheat managed to stage something of a recovery, albeit a modest bounce. The heavy selling that followed the release of the USDA Outlook data appears now to have been arrested.
As we roll into March, we will start to enter
into something of a weather market. The state of Northern Hemisphere winter sown crops and the
Spring sowing pace will become part of the regular vernacular. Already the
spotlight is starting to focus on a number of key countries.
French winter soft wheat is in relatively
poor condition at only 68% good to excellent, far below the average 85% and on
par with the disastrous 2020 crop. The crop has battled with excessive moisture
since seeding and is already looking at a 7% reduction in area. Coupled with
this, the spring seeding progress is also delayed due to the persistent
moisture.
The Canadian Prairies on the other hand
remain stubbornly dry. Snow cover remains sparse meaning that this year’s crop
will be heavily dependent on in-crop rainfall.
Seeding will begin in late April through May, so there remains plenty of
time for moisture to improve ahead of seeding.
There is also a fair bit of chatter about the
state of the safrinha (second) corn crop in Brazil. While moisture is described
as adequate for the current crop stage, the total accumulation is running well
behind average. Seeding is running at 25% complete, fractionally behind
average. This will become more of a
story if the seeding pace falls well behind as seasonal rains follow a strong
correlation to the calendar.
The anchor around wheat’s neck is linked to
another large crop coming from Russia and the propensity for fund managers to
sell wheat at every opportunity. The record large net sold (short) position in
wheat and corn could become vulnerable if any of the red flags mentioned above become
a bigger story.
Next week
It feels like the market is not yet concerned about ‘potential’ problems and will instead focus on current issues like demand and the strong competition being waged for consumer business.
Give or take a few cents, the US wheat market close last night was relatively unchanged for the week. Some supportive news, including better-than-expected new
The fact that the wheat market has been relatively unchanged week on week doesn’t imply the market has been without volatility. After a slightly bearish
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Wheat is a problem looking for solutions
Next week
It feels like the market is not yet concerned about ‘potential’ problems and will instead focus on current issues like demand and the strong competition being waged for consumer business.
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Click on graph to expand
Data sources: USDA, SovEcon, Progressive Farmer, Refinitiv, Mecardo
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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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