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 Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released their September Crop Report last week. The good season to date across much
The wheat complex has experienced a rather choppy few days, with systematic profit-taking shifting some of the heat out of the supply-squeeze-driven buoyancy we are
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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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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.
Have any questions or comments?
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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Have any questions or comments?
Long, nervous and waiting
Despite a string of headlines that should, on the face of it, be supportive, the wheat market continues to trade in a relatively narrow range.
A good bump in winter crop production
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released their September Crop Report last week. The good season to date across much
Wheat waits for a trigger
The wheat complex has experienced a rather choppy few days, with systematic profit-taking shifting some of the heat out of the supply-squeeze-driven buoyancy we are
Should we be selling wheat?
It’s a bit of an understatement to say there is a bit going on in grain markets at the moment. Here we’ll cover price and
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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.
MEET THE TEAM
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.
SERVICES AND CAPABILITIES STATEMENT BROCHURE
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.