The wheat market has been caught in something of a downdraft this week. High-level talks between the US, Russia, and Ukraine have been viewed as ‘positive’ towards achieving a ceasefire between the two combatants. The White House heralded the news that the Russians would ‘allow’ maritime traffic in the Black Sea to resume and saw some heat come out of the wheat and corn markets. However, the deal comes with some concessions. Firstly, Russian banks would need to be reconnected with the SWIFT banking system. Secondly, the US would help Russia access improved global food and fertiliser markets.
Any concession with the SWIFT banking system will need to be ratified by the European Union and is unlikely to be approved given recent tensions. Greater access to food and fertiliser markets is an unusual request, given that Russian grain exports tallied around 71 mmt in the 23/24 season, compared to 42 mmt in 21/22 (A Sizov, SovEcon). Ukraine managed to reroute export flows to avoid Russian interference, thereby maintaining their export volumes. So, all in all, the market reaction appears to be around nothing more than the meeting itself. It begs the question; if the concessions are not being met—or are already being met—what exactly has been achieved?
As we move into April, the market will focus with laser-like intensity on weather in the major exporters. After a dry spell in the Black Sea, this week’s rain appears in the forecast for Ukraine and Russia. The 90-day rainfall anomaly chart (see chart) shows significant moisture deficits building across Ukraine and Russia’s south. We all know how important spring rainfall is, so the timing here couldn’t be better. IKAR recently increased Russian production from 80.5 mmt to 82 mmt as that crop stabilises after getting through winter relatively unscathed.
Perhaps the biggest mover this week has been canola. After being on the end of seemingly endless knocks, the canola (and by default, rapeseed) markets have staged something of a solid recovery. A recent StatsCan planted acreage report suggested little change to the canola area year on year. However, as that survey was done in December—well before we had even considered the tariff threat—there is significant doubt over the assertion. It is thought Canadian farmers will plant less canola with the threat of being locked out of two of their biggest markets. Combined with slow farmer selling in the EU and a slight rebound in crude oil prices, ICE canola has climbed CA$26/t for the week, and MATIF rapeseed €29/t.
The week ahead….
The USDA will release its intended acreage report this week. This will be keenly watched, with an expected jump in corn acres at the expense of soybeans. April 2 looms as also being significant, with a raft of tariffs and reciprocal tariffs expected to be unveiled.
The latest United States Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) report was released last week, but being at the end
This week, commodity markets held its breath as the White House unveiled its reciprocal tariffs. The list of countries impacted by the tariffs was expansive
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Wheat stumbles, canola bubbles
Any concession with the SWIFT banking system will need to be ratified by the European Union and is unlikely to be approved given recent tensions. Greater access to food and fertiliser markets is an unusual request, given that Russian grain exports tallied around 71 mmt in the 23/24 season, compared to 42 mmt in 21/22 (A Sizov, SovEcon). Ukraine managed to reroute export flows to avoid Russian interference, thereby maintaining their export volumes. So, all in all, the market reaction appears to be around nothing more than the meeting itself. It begs the question; if the concessions are not being met—or are already being met—what exactly has been achieved?
As we move into April, the market will focus with laser-like intensity on weather in the major exporters. After a dry spell in the Black Sea, this week’s rain appears in the forecast for Ukraine and Russia. The 90-day rainfall anomaly chart (see chart) shows significant moisture deficits building across Ukraine and Russia’s south. We all know how important spring rainfall is, so the timing here couldn’t be better. IKAR recently increased Russian production from 80.5 mmt to 82 mmt as that crop stabilises after getting through winter relatively unscathed.
Perhaps the biggest mover this week has been canola. After being on the end of seemingly endless knocks, the canola (and by default, rapeseed) markets have staged something of a solid recovery. A recent StatsCan planted acreage report suggested little change to the canola area year on year. However, as that survey was done in December—well before we had even considered the tariff threat—there is significant doubt over the assertion. It is thought Canadian farmers will plant less canola with the threat of being locked out of two of their biggest markets. Combined with slow farmer selling in the EU and a slight rebound in crude oil prices, ICE canola has climbed CA$26/t for the week, and MATIF rapeseed €29/t.
The week ahead….
The USDA will release its intended acreage report this week. This will be keenly watched, with an expected jump in corn acres at the expense of soybeans. April 2 looms as also being significant, with a raft of tariffs and reciprocal tariffs expected to be unveiled.
Have any questions or comments?
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Data sources: USDA, Andre Sizov, IKAR, Bloomberg, Mecardo, Next Level Grain Marketing
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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.
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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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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.