The unsettled nature of the grain markets is composed largely around tight stocks, supply issues, war, government interventions, rising interest rates and high prices. Now you can add another element to the mix global financial crisis 2.0. The talk of recession, inflation and weakening economies is rattling the market, with the negative sentiment spilling into grain markets.
Food demand and food security tend to isolate the ag commodities from the wider financial markets. But as one analyst pointed out, the removal of liquidity across a range of asset classes can leave markets strung out and prone to ‘oversized’ moves. How this plays out only time will tell, but it adds another level of complexity to an already stretched market.
The wheat market is still firmly locked on what is happening in the Black Sea but attention will shortly turn to weather. At the minute, the wheat market is in a stage of hibernation as end users wait for new crop supplies, but also wait in hope of some kind of resolution in the Black Sea. Big buyers are very quiet at the moment as they look for opportunities to buy dips in the market. The trade know they have to buy, but with prices so high, the end users seem content to live hand to mouth.
US spring wheat, corn and bean crops ended up being sown and have good moisture. Early crop conditions out of the US indicate the good to excellent condition scores sit near the top of expected ranges (70%) for this time of year. The key will be July weather as the crops enter pollination stages. If benign conditions prevail, coupled with slow consumer demand and worsening economic conditions, it might spark a move lower. Flip side (there is always a flip side) is that due to tight stocks, any perceived production threat could light a buying frenzy if consumers fear that prices could climb again.
Turning attention to Ukraine, a proposal by the US to build temporary grain storage facilities on the border with Poland to help with this seasons harvest, was initially well received. However with harvest having commenced in southern regions, time is running out for this proposal to be of any use to this seasons winter crops. Upwards of 20mmt of old season crop remains in warehouses or in ports under blockade. Turkey is still offering to help initiate an ‘export corridor’ which seems the most likely alternative to accessing Ukrainian supplies. However, Russian actions are not matching the dialogue, so the likelihood of a corridor being established seem remote.
The week ahead….
This remains an incredibly unpredictable and volatile market. Sometimes moves can be counter intuitive to what is happening in the wider market. Expect the wheat market to remain choppy while we get through the Northern Hemisphere harvest and we can gauge buyer sentiment.
Last week we looked at the Australian Bureau of Agricultural and Resource Economics and Sciences Crop Report, noting the strong growth in the forecast for
The seasons in the north and south couldn’t be more different in terms of rainfall and crop progression. While somewhat overshadowed by market movements, the
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.
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.
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.
Wheat is simply biding its time
Food demand and food security tend to isolate the ag commodities from the wider financial markets. But as one analyst pointed out, the removal of liquidity across a range of asset classes can leave markets strung out and prone to ‘oversized’ moves. How this plays out only time will tell, but it adds another level of complexity to an already stretched market.
The wheat market is still firmly locked on what is happening in the Black Sea but attention will shortly turn to weather. At the minute, the wheat market is in a stage of hibernation as end users wait for new crop supplies, but also wait in hope of some kind of resolution in the Black Sea. Big buyers are very quiet at the moment as they look for opportunities to buy dips in the market. The trade know they have to buy, but with prices so high, the end users seem content to live hand to mouth.
US spring wheat, corn and bean crops ended up being sown and have good moisture. Early crop conditions out of the US indicate the good to excellent condition scores sit near the top of expected ranges (70%) for this time of year. The key will be July weather as the crops enter pollination stages. If benign conditions prevail, coupled with slow consumer demand and worsening economic conditions, it might spark a move lower. Flip side (there is always a flip side) is that due to tight stocks, any perceived production threat could light a buying frenzy if consumers fear that prices could climb again.
Turning attention to Ukraine, a proposal by the US to build temporary grain storage facilities on the border with Poland to help with this seasons harvest, was initially well received. However with harvest having commenced in southern regions, time is running out for this proposal to be of any use to this seasons winter crops. Upwards of 20mmt of old season crop remains in warehouses or in ports under blockade. Turkey is still offering to help initiate an ‘export corridor’ which seems the most likely alternative to accessing Ukrainian supplies. However, Russian actions are not matching the dialogue, so the likelihood of a corridor being established seem remote.
The week ahead….
This remains an incredibly unpredictable and volatile market. Sometimes moves can be counter intuitive to what is happening in the wider market. Expect the wheat market to remain choppy while we get through the Northern Hemisphere harvest and we can gauge buyer sentiment.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Click on graph to expand
Data sources: Reuters, Dartboard Commodities, Mecardo.
Categories
Have any questions or comments?
Changes to local wheat forecasts crunching basis
Last week we looked at the Australian Bureau of Agricultural and Resource Economics and Sciences Crop Report, noting the strong growth in the forecast for
Russia, USDA and a Rock wall
Picture if you will, a rock climber, gradually, step by step, grasp by grasp, pulling themselves up the face of a sheer rock wall. This
Contrasting crop production
The seasons in the north and south couldn’t be more different in terms of rainfall and crop progression. While somewhat overshadowed by market movements, the
China’s canola curve ball
The wheat market has enjoyed something of a bounce this week. Having briefly touched multi-year lows of 525c/bu for the Dec ’24 contract last week,
Want market insights delivered straight to your inbox?
Sign up to the mailing list to get regular updates to new analysis and market outlooks
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.
SERVICES AND CAPABILITIES STATEMENT BROCHURE
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.