The dip in prices has brought out some bargain hunters, with
China believed to have picked up a few extra cargoes of US SRW wheat. Amplifying the move higher has been the
covering of some poorly placed short (sold) positions held by the managed money
Back in Australia, reports that up to 1mmt of wheat is at
immediate risk of being downgraded, does tighten up high protein milling wheat
supplies in the export grid. More accurate estimates will eventually hit the
headlines in the coming weeks, but at this stage, overall losses appear to be
limited. With harvest approximately
70-75% complete across the nation, this rain event does not appear to be in the
same category as the widespread damage to quality that occurred in 2021/22.
Looking forward, preliminary estimates by SovEcon suggest that
both Ukraine and Russia will see lower year-on-year wheat production in the 2024/25
season. Should this be the case, when you include a ban on Indian exports,
weather troubles in South America, and a global stock to use (excluding China)
of around 13.5% it spells another volatile year for ag commodities coming up.
Better-than-expected weekly US exports aided this rally. For the market shorts to significantly rebalance their positions, sustained cuts to production will be carefully watched. If the US continues to pick up non-routine business, we might see further strength. If not, the market will see some profit taking.