Did Australian weather just move the market's needle? After weeks of the market edging lower and lower (we hit multi-year lows earlier this week with the AUD futures falling below $300/t), we have seen three straight ‘up’ sessions. The reason is likely a little more nuanced than simply the rain in Southeast Australia.
This week, Russia released a statement suggesting it is
prepared to impose an export ban on wheat (they won’t) if stockpiles were to
fall below 10mmt. It is likely a Kremlin directive reminding everyone of who is
really in charge. Russian FOB values
have been gradually increasing to the point that French and Romanian origins
are starting to factor into price consideration. European exports are likely to
fall 8% this marketing year due to competition from Black Sea origins, so the
fact they are starting to pick up business helps to suggest that a bottom has
been reached.
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
crowd.
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.
Next week
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.
The worm seems to have turned somewhat in the grain and oilseed complex. While there is some short-term support coming from yet more geopolitical unrest,
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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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Wheat weaves its tangled web
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 crowd.
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.
Next week
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.
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Click on graph to expand
Click on graph to expand
Data sources: Reuters, SovEcon, IKON Commodities, Next Level Grain Marketing, USDA, Mecardo
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Moving in the right direction
The worm seems to have turned somewhat in the grain and oilseed complex. While there is some short-term support coming from yet more geopolitical unrest,
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Argentina dealt a cruel hand
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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.