Wheat crop blowing in the wind

Wheat has risen off the canvas, taken a standing eight and launched into a counter-punch. Having touched 540c/bu a couple of weeks ago, the CBOT Dec ’23 contract has pushed back above 590c/bu. It is a sight for sore eyes for those of us who have been shaking our heads at how far the price of wheat has fallen.

Ever the opportunist, China has stepped in recently with some large commodity purchases.  After a very slow start, Chinese purchases of US grains are getting close to average.  Year on year, China is only 5% behind on total wheat imports (680kmt for the month of Oct), 31% behind of soybean imports (thanks to Brazil) but an impressive 22% increase in corn imports.

 It is likely the corn business is behind this rally, which is odd in itself given the US is forecasting a carryout in excess of 2B bushels (~50Mmt).

 There is no doubt that markets are experiencing some kind of ‘risk on’ moment.  There is so much political turmoil going on, that it feels like major importers are going to need to step up purchases if they want to buy it while it’s cheap.  Russia remains the cheapest and most plentiful origin which is pouring cold water on any attempts the market is making to really heat up.

 Speaking of cold water, Argentina looks to receive some very timely rains this week. Having adjusted the crop condition ratings to 50% fair to poor, these rains should arrive in time to assist grain fill. Damage has been done due to prolonged drought, but as we know, wheat is a tough plant that can hang on and add yield late in the season.  The USDA has Argentine production at 16.5mmt, down 10% on the 5-year average of 18mmt, but 4mmt above last year’s crop.

There are a lot of balls in the air at the moment.  The flash point in the Middle East appears to be at risk of spilling over into a full-blown conflict. Chinese demand is adding an element of haste. Drought in Brazil is raising questions over next year’s crop and causing navigation issues along river corridors. Economics. Crude oil. Russian exports.  Good luck trying to fit all the pieces of this puzzle together.

Next week

The Aussie shipping
stem looks to be getting busy with old and new crop wheat and barley heading for China. Harvest is ramping up in SA and WA with the grower happy to sell. Black Sea wheat is reported to be displacing Aussie from some of our SE Asian customers so the Chinese demand will be crucial going forward.

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Click on graph to expand

Click on graph to expand

Data sources: Reuters, USDA, Next Level Grain Marketing

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