This week has been more of the same as wheat continues to spiral down the proverbial gurgler. The annual Profarmer tour of the US is confirming the market's suspicion that this year's corn and bean crops are going to be big. Supply is plentiful and demand remains subdued, with the Chinese X-factor remaining enigmatic at best.
After last year’s monster crop, Brazil has replaced the US as the leading supplier of
soybeans to China. Chinese imports totalled US$31.9B of Brazilian origin –
nearly 2/3’s of their total import – with the US a distant second with a net
value of US$18B. It is a similar story for corn, with Brazilian exports to
China up nearly 30% for the year at the expense of US corn. Coupled with this year’s US crop, row crop prices have been under significant pressure.
Over the past couple of years, China has imported between 10-12mmt of wheat with Australia supplying
5-6mmt on an annual basis. A state-mandated directive to build internal stocks has helped to drive that demand.
This coming marketing year, the demand figure is a little more
shrouded. Are internal stocks considered adequate? What has been the actual
Chinese harvest? Are economic factors at play?
The overwhelming weight of the Northern Hemisphere harvest, the coming
row crop harvest, the heavy speculative short and the lack of meaningful demand volume are dominating the direction of the
market. Issues that once would have sent the market rocketing, barely raise an eyebrow.
Ukraine is making full use of the new Western armaments and striking further
into mainland Russia than ever before. Retaliation seems inevitable, but to
date, it has not resulted in a jump in prices.
It feels like we need to get this year’s harvest in the bin before the market can right itself. An Australian
crop above 32mmt is on the cards and if Argentina could turn out a crop around
18mmt, it would keep the bearish trend firmly in place.
Next week
Keep an eye out for bargain hunters. Egypt has restated its intention to purchase 3.8mmt of wheat before the end of 2024. The initial purchase of 280kmt left the market feeling a little underwhelmed. Some good, old-fashioned demand is just what we need to see, to get this ship back on course.
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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 weighed down by lack of demand
After last year’s monster crop, Brazil has replaced the US as the leading supplier of soybeans to China. Chinese imports totalled US$31.9B of Brazilian origin – nearly 2/3’s of their total import – with the US a distant second with a net value of US$18B. It is a similar story for corn, with Brazilian exports to China up nearly 30% for the year at the expense of US corn. Coupled with this year’s US crop, row crop prices have been under significant pressure.
Over the past couple of years, China has imported between 10-12mmt of wheat with Australia supplying 5-6mmt on an annual basis. A state-mandated directive to build internal stocks has helped to drive that demand.
This coming marketing year, the demand figure is a little more shrouded. Are internal stocks considered adequate? What has been the actual Chinese harvest? Are economic factors at play?
The overwhelming weight of the Northern Hemisphere harvest, the coming row crop harvest, the heavy speculative short and the lack of meaningful demand volume are dominating the direction of the market. Issues that once would have sent the market rocketing, barely raise an eyebrow. Ukraine is making full use of the new Western armaments and striking further into mainland Russia than ever before. Retaliation seems inevitable, but to date, it has not resulted in a jump in prices.
It feels like we need to get this year’s harvest in the bin before the market can right itself. An Australian crop above 32mmt is on the cards and if Argentina could turn out a crop around 18mmt, it would keep the bearish trend firmly in place.
Next week
Keep an eye out for bargain hunters. Egypt has restated its intention to purchase 3.8mmt of wheat before the end of 2024. The initial purchase of 280kmt left the market feeling a little underwhelmed. Some good, old-fashioned demand is just what we need to see, to get this ship back on course.
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Click on graph to expand
Click on graph to expand
Data sources: Profarmer, Lachstock, DAFF, Next Level Grain Marketing, Refinitiv, 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.
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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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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.