Having ticked off ‘three-year lows’ on its bingo list, wheat staged something of a rally overnight. The trouble is, it wasn’t anything of its own doing.
The USDA released their World Agricultural Supply & Demand Estimates (WASDE) last night, which was if anything, a little friendlier than expected. Markets had been grinding lower on the expectation that stocks would be higher across the board. While wheat stocks were higher, albeit in line with expectations, soybean stocks were unchanged and corn stocks were lower. It was the fact that soybean stocks were unchanged when the market was expecting a modest increase, that caused the strong bean rally which spilled over to corn and wheat.
Overall global wheat production was ratcheted down by 4mmt on reductions to Australia (-1.5mmt), Brazil (-0.5mmt), Kazakhstan (-2mmt) and Ethiopia (-2mmt), offsetting the increase in US production (+2mmt). Once again, the report left Russia at 85mmt whereas more than a few international analysts have the crop >90mmt. Major exporter stocks listed at 53mmt (-1mmt) or 13% stocks to use.
One of the key reasons why CBOT has been sliding in recent months has been the unrelenting export pace and cheap supplies out of the Black Sea. It is believed that Russian ports are operating at maximum capacity with an estimated 5mmt per month hitting the waves. However, as per (SovEcon) the month of October is shaping up to be relatively poor. Is Government inference to blame? The government mandated ‘floor’ price is seen as being too high, with private exporters regularly selling below this. It is creating some confusion and possibly some headwinds in terms of origination.
It begs the question, are we seeing seasonal lows? The charts show wheat futures bouncing off 540c/bushels and trying to consolidate around the 560c/bushel mark. It will be interesting to watch consumer behaviour in the coming weeks which will give a few more answers.
Next week
The Aussie dollar got belted last night. This will hopefully help Aussie exports which are starting to feel the weight of cheap Black Sea grain eating into early market share.
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 rides a bean bounce
Next week
The Aussie dollar got belted last night. This will hopefully help Aussie exports which are starting to feel the weight of cheap Black Sea grain eating into early market share.
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Data sources: Reuters, SovEcon, USDA, Dartboard Commodities, Next Level Grain Marketing, 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.