Wheat Market Outlook: Recent Episodes
Sask Wheat
Sask Wheat's weekly wheat market outlook analyzes domestic and global factors that impact wheat prices and market access for Saskatchewan wheat producers. Marlene Boersch of Mercantile Consulting provides a weekly overview of the wheat market summary.
Mercantile says that there was nothing in the WASDE report to stir the markets. Wheat traders are looking at the sluggish demand, and the abundance of old crop wheat that needs a home before harvest starts. Looking further out, there are several weather concerns and wheat supply will be tighter this year once all work through the glut of grain that is currently on the market.
According to Mercantile, the recent tenders demonstrated both the lack of cover of the major importers, but also the abundance of available old crop wheat. Weather is still a major issue in some regions (Russia and France) while politics are causing additional complications, says Mercantile. The USDA report is out on Wednesday.
According to Mercantile, wheat prices seasonally decline in June as harvest begins in the Northern Hemisphere. However, weather concerns, especially in Russia where the drought is expected to deepen, will challenge the seasonal weakens of the wheat market.
It is a short week, so Mercantile doesn’t see much change in the markets. The futures will be lightly traded and a little weaker by the and of the week, but thin according to Mercantile. Growers will sell some old crop and leave the new crop alone while weather is so variable. The funds will remain undecided. Mercantile would continue to hold new crop sales for the time being. Mercantile does not see a reason to sell any new crop while weather remains unpredictable.
All markets opened the week stronger, according to Mercantile. Minneapolis spring wheat futures were up 21.75 to 28.25 cents across the board. Weather is likely playing a factor, as the next seven days remain dry for the Southern Plains. Mercantile says Russian and EU FOB prices have also recently climbed to a more competitive price with the U.S. on the Black Sea crop concerns. EU (Matif) futures were up $12. Mercantile does not see anything that is bearish in the short term. Weather concerns will continue to dominate the markets.
According to Mercantile, many of the origins saw their stocks lowered, so Mercantile says these are bullish statistics. Ukrainian domestic supplies are the lowest since 2013, as production declines and stocks normalize.
According to Mercantile, Funds are nervous and are reversing positions and consumers are largely uncovered and are getting anxious. On the other hand, Mercantile says Russia seems to have the capacity to keep one million mt/week flowing for another 14 months, and current prices are high relative to stocks. Assuming normal yields for now, farmer margins are swinging back into the black.
Mercantile says wheat has benefitted fund-led short covering, but now will watch corn, where funds are still near record short and long-term moving averages have been broken. According to Mercantile, wheat has become expensive vs. corn, so any further strength in corn could provide the next wave of support to wheat prices.
Funds are now long MATIF, which is a partly a reflection of the smaller W EU crops and the risk of a smaller Russian crop. Mercantile says the challenge is that Russia is the most aggressive new crop seller, and they may well raise the reference price to lower the export tax.
While weather continues to be difficult to read and plantings are delayed, Mercantile does not see any major reasons for markets to fall, although wheat could be overdone.
Nevertheless, 97.9 per cent of Kansas is experiencing some sort of abnormal dryness, according to Mercantile, and there are concerns in most of Europe. In this climate, Mercantile does not see growers selling.
So far, Funds are not covering their shorts, but Mercantile thinks they must be getting worried. While the weather remains uncertain, Mercantile suggests that growers make no new crop sales.
Mercantile says geopolitical tensions are causing additional uncertainty in the commodity markets. There is currently a standoff between the fund short and farmer holding. - Mercantile would use this rally to finish old crop wheat sales but would not sell any new crop for now.
Mercantile says the international climate remains fractious, particularly in the Middle East. Mercantile is slowly seeing energy prices increasing and inflation starting to rise. In their view, world buyers are largely finished with old crop purchases. Futures will be moved by whatever Funds or farmers need to do. Mercantile sees the old crop going lower as carrying charges increase, while there will be little trade in new crop while traders remain concerned about weather and growers don’t like the values. – Mercantile would target remaining old crop spring wheat at $0.10 above current values, but would not sell new crop wheat for now.
Mercantile will have a new WASDE report on Thursday. Mercantile expects the USDA to lower wheat exports because of the Chinese cancellations a few weeks ago. According to Mercantile, the USDA will leave wheat production estimates alone and still expects slightly stronger wheat futures while the politics in the Black Sea area remains unclear. There were rumours of more Chinese cancelation of some wheat and corn, Mercantile said. The Funds’ combined corn, beans and wheat positions are at a record net short for this time of year, which should keep the volume of trade low until the WASDE report is absorbed. Weather and politics will keep trade at a minimum. – Watch for opportunities to sell remaining old crop wheat. Mercantile would not touch new crop sales yet.
Mercantile believes Russian and Black Sea politics will likely dominate conversation in the coming week. If the dispute between RIF and Moscow continues, Mercantile says it could be bullish the current crop wheat. The USDA seeded area and quarterly stocks reports are out on Thursday. The trade is expecting larger wheat stocks (one billion bushels) and smaller seeded area (47.3 million acres). All this is combined with a short trading week given the Good Friday holiday. Mercantile does not recommend cash sales at this time.
According to Mercantile, Chinese wheat cancellations/deferrals will weigh on the market in an environment where old crop demand is limited. The EU and Black Sea still have old crop wheat in need of a home before June. Mercantile would recommend looking at finishing old crop sales but would not sell new crop for now.
Mercantile expects some weakness in wheat futures following the decline in cash values. Mercantile says there will be more pressure on the old crop as weather concerns and low returns makes new crop sellers reluctant. Chinese cancellations of wheat changed the United State’s tone, according to Mercantile. Cash wheat markets remain weak as the EU and Black Sea search for old crop demand. Mercantile would finish old crop sales but would hold off selling new crop for now.
Mercantile says there are few buyers left for the current crop wheat so prices could be headed even lower whilst they still have current crop sellers who need to sell. However, Mercantile does expect some Fund buying so they would leave cash markets alone for the time being.
According to Mercantile, Russia still has wheat to sell and this is lowering world price as the EU needs to reduce stocks. Wheat needs to fight for feed demand as well as milling demand. Meanwhile, Funds have a record short at a time when prices have fallen below the cost of production for growers in some areas. Either costs will need to go down, or markets higher.
The opportunity for an old crop wheat rally is dwindling, according to Mercantile. Every major wheat exporter still has wheat to ship, and exporters will be competing for shipping windows in the next three months before the new crop harvest starts. Mercantile says more questions remain as to if there is demand for all the available wheat. Currency devaluations in many importing nations means that wheat continues to be very expensive, according to Mercantile, even though wheat prices in U.S. dollars are approaching pre-war levels.
The EU, Russia and Ukraine need to see record export demand for Feb. through June to meet USDA projections, and there seems to be little evidence at the moment that demand will come close to those numbers.
At the same time, traders are concerned about the developments in the Middle East and about geopolitical disputes in general. This environment will keep markets steady, but as the cheapest food grain, it could support wheat rather than corn. However, the Russian government’s action last week to drop the ‘recommended’ export floor price shows they are ready to continue fighting for markets.
Mercantile recommends producers be fully sold on durum and look for opportunities in spring wheat.
As prices fall, there is a declining likelihood of further decreases, but at the same time, there are indications of more distressed sellers trying to generate cash to pay for spring inputs given expensive storage and finance costs. Heat and dryness are noted in India, but given last season’s experience, the market will be reluctant to react too aggressively. Poor crop prospects in North Africa support notions on imports. Meanwhile, the EU and Black Sea countries need to find a record nine million mt per month of export demand to reach current export forecasts before new crop arrives. This somehow needs to be achieved with two conflicts being fought along the supply chains to the Middle East and Asian markets. Traders are concerned about the developments in the Middle East and about geopolitical disputes in general. This kind of environment will keep markets steady to lower, but as cheapest food grain, we could see wheat firmer than corn. We would be fully sold durum and wait a little to see if we get some spark in spring wheat.
Mercantile’s outlook this week: Mercantile believes it is tough predicting markets with so many trouble spots in play. Their inclination is that growing conflicts will prove to be a little negative for most commodities as demand will be lower. Mercantile could see wheat a tad higher, as Russia looks more reluctant to be aggressive sellers forward. Mercantile doesn’t see traders making any major moves in futures. They are 60 per cent sold and if wheat manages to move up, they would start looking for opportunities to sell another 20 per cent at ~$9.25 depending on your location.
Mercantile expects wheat futures to continue sideways. They think the wheat market is supported but will have difficulty moving higher while corn remains under pressure. Traders will watch the Southern Hemisphere weather and focus will be on the Northern Hemisphere for winter crop development and spring crop planting. If attacks continue in the Red Sea, we may see cash C&F prices move higher.
Mercantile’s Outlook This Week:
The markets are closed today for Martin Luther King Jr. Day. We do not expect much of a decline in wheat during the week. In fact, we expect wheat to show some strength. Funds will continue to buy in their short. But we don’t expect a decline in Black Sea cash offers. Algeria tenders Tuesday for its April soft wheat requirements and it will be interesting to see what is offered. We suggest holding wheat until we see the offers against Algeria.
The next USDA report is out on Friday (Jan. 12, 2024). Mercantile says the trade is expecting a smaller winter wheat seeded area. Cold temperatures in parts of Europe, and excessive moisture in parts of the EU are giving rise to some production questions, but harvest in the Northern Hemisphere is still over five months away. Consumers are buying as needed and see no reason to extend coverage beyond that.
From Mercantile’s perspective, Saudi Arabia’s tender was unexpectedly large, but the price does not support North American execution. Traders are going on holidays, so futures markets will be thin until after Christmas.
Mercantile says Russia continues to be the dominant force in the wheat market as shown by its performance at the GASC tenders. According to Mercantile, Chinese buying is supportive should it continue. Chinese holidays will have them away until Jan. 15, 2024.
China remains the largest customer for Canadian wheat, but at 539k mt, exports to China are just 51 per cent of last year’s volume year-to-date. Meanwhile, countries outside of the top importers have increased demand for Canadian wheat.
Mercantile says there was evidence of Fund buying as they start to cover their short. Mercantile does not expect too many moves and the volume will be light as we move towards Christmas. Mercantile has several important reports coming in this week (Australian numbers, Stats Canada, USDA reports), and they do not expect these reports to be bearish. Wheat sales to China are supportive and if Funds continue to buy in their shorts, Mercantile says they could see strength in the futures markets.
In Mercantile’s view, corn and wheat should be higher based on demand, unsettled politics, and weather in the Southern Hemisphere. – They do not expect to extend cash wheat sales until the New Year.
It is a short week in the U.S. due to the Thanksgiving holidays. Mercantile believes wheat may go lower while the EU needs to sell against the Russian competition. Mercantile does not expect to see much from the funds, although they say it was interesting to see them short cover some last week. The disputes in the Ukraine and Gaza remain and may affect the markets.
According to Mercantile, the funds are maintaining a large short position, but there was nothing in the USDA report to cause them to change course. Russian wheat remains the cheapest for most of the potential importers, and weak currencies against the dollar remain negative to demand, Mercantile says. The trade will be watching the harvest results in the Southern Hemisphere and Chinese wheat demand.
Mercantile expects it will be a slow week with a new WASDE report due on Wednesday. Buyers might hope that wheat prices are lower due to the Russian duty reduction, however, Mercantile does not think so. According to Mercantile, wheat is struggling for fresh input amidst a visible lack of demand, while the funds still hold a near record short, and there are planting issues in parts of Europe and South American weather conditions are of concern. Mercantile would hold additional sales for now.
According to Mercantile, the Funds are carrying a large short position in wheat, but there is nothing currently in the mix to push them to reverse this. Mercantile expects prices to be lower as pressure continues from the U.S. corn harvest. Further forward, Mercantile sees firmer levels when the harvest is in the bin. Weak local currencies will keep prices low for the present while the Russians continue to be aggressive sellers of wheat. Mercantile notes, world events are extremely volatile at present and suggest a degree of caution. It should be kept in mind that there is a short crop in Canada and prices don't carry any war risk premium according to Mercantile.
Mercantile says the funds are short and believes more buying by China must be a concern to them. Currency remains a restriction to demand. South American weather, Ukraine logistics, Chinese demand, and a widening window for U.S. exports of wheat will be the market drivers according to Mercantile. In Mercantile’s view, wheat is getting too cheap, so they still think holding to the New Year, when they expect better prices, is the best strategy.
In the short term, Mercantile see futures trading in a narrow range and growers being reluctant sellers at current returns. According to Mercantile, Russia will continue to be the most aggressive seller as, in their opinion, the price is not too bad, and they need the dollars. It is difficult to forecast events for Mercantile when they do not know how the events over Hamas/Israel will develop. But Mercantile says to keep in mind that war zones do not create demand. Weather in the Southern Hemisphere, Chinese demand and Russian exports will be the main drivers moving forward. Mercantile would hold additional wheat sales for the new year.
According to Mercantile, traders are working through the several unusual dynamics in the markets. Mercantile does not expect much change during the week, especially since they have a new WASDE report coming on Thursday. Mercantile prefers to hold additional sales this week given the number of unusual occurrences happening, and a new WASDE report which could be slightly bullish. Mercantile would not suggest additional sales at this time.
Mercantile says wheat markets crashed when the USDA’s Small Grains Summary put wheat production much higher than the trade expected. Russian wheat is still talking most of the export demand. Although Russian export price schemes continue to create confusion in the market, it seems like the Russians have lowered their floor price according to Mercantile. Mercantile does not see much reason for better prices in the short term.
Mercantile believes North American wheat remains too expensive except for special hard wheat buyers. The stock position will be important for future direction. Year to date usage remains low according to Mercantile. The Russian crop is large and storage problems will force sales there. Mercantile expects that futures will continue to fall in the short-term, and then improve in the New Year. Mercantile would not suggest additional sales at this time.
In Mercantile’s view, the WASDE report was constructive for wheat. However, exports year-to-date are disappointing and some will question the USDA’s export forecast as being too high. Nevertheless, we ‘might be’ at a tipping point in the wheat markets. Over much of the summer, consumers have taken advantage of declining spot prices to lower their buying average. Seasonal upswings from this point in the year are typical, says Mercantile, and while consumers seem to be generally well covered for the fall positions (O/N/D), they are still mostly open for 2024. Russia is still the cheapest source of wheat by far but does not offer far forward. So, consumers will have to choose to stay open/uncovered, or else to cover from more expensive origins says Mercantile. Mercantile would not suggest additional sales at this time.
Mercantile says the focus of the markets will be the USDA-WASDE reports next Tuesday. The seasonal tendencies for wheat prices to rise into the winter and the anticipation of reduced Southern Hemisphere and Canadian supplies are the main bullish motives in coming weeks, according to Mercantile. The counter arguments are that this is already priced in with the large carries in the cash and futures market. Mercantile is worried about the aggressiveness by Russia into the export markets despite reports of problems with their spring wheat crop. Russia is taking up a lot of import capacity, in Mercantile’ s opinion. Mercantile still expect markets to move higher in the New Year, but from what level? The wheat market remains very complicated, but Mercantile expects it to move higher in the New Year, so storage is important.
The fund position across the three wheat futures markets is now a combined short of 95k contracts, but still well below the deepest short they have held of around 150k contracts during 2016-2017 according to Mercantile. The wheat market remains quite complicated, and both bearish and bullish arguments can be made. For example, the bears in the market point to the boundless flow of four million mt (+) per month of wheat from Russia, which is affecting other exporters’ volumes. (EU and U.S. exports down 20-30 per cent on last year.) The Russian private sale outside the usual GASC tender system of almost half a million mt of wheat to Egypt over the weekend only confirms the Russian aggressiveness to just keep selling. On the other hand, Mercantile says the bulls in the market are shifting their attention from the logistic effects of the Russia-Ukraine war to potential Indian wheat imports and by focusing on declines in southern hemisphere production to reduce supplies. The market seemingly awaits confirmation from either (or both) sides before making a definitive move, says Mercantile.
Mercantile will have to see how the trade reacts this week to the additional Russian sales to Egypt outside the usual tender system that happened over the weekend. The drop in OI in U.S. wheat futures and the expanding fund short make U.S. futures increasingly vulnerable to de-linking further from world wheat values.
So, the wheat market remains very complicated, but Mercantile expects it to move higher in the New Year, making storage important.
Mercantile says, Russia continues to push wheat into the market while buyers are being very cautious in their buying and remain so in a falling market. However, Canada, Argentina and Australia all now have significant crop concerns, which along with a potentially significant major import program by India could materially change the market in the latter half of the season, according to Mercantile. Mercantile expects markets to move higher in the new year, so storage is important and selling as little as possible for now. Mercantile says producers will have to be patient with this market to work through some of the cheapersupplies into the new year.
According to Mercantile, Russian/Black Sea wheat sales levels remain below North American levels. On the demand side, Mercantile thinks financials are pressuring new buying and harvest pressure is keeping prices lower.
Spring wheat remains too high compared to Chicago futures in Mercantile’s opinion. However, if you don’t have cash flow needs, Mercantile would put grains to storage and wait for higher prices in the New Year.
Mercantile says North American cash and futures prices need to go lower to be competitive with other competing origins. The premium of spring wheat over lower grades remains too high and must go lower according to Mercantile. Weather will provide volatility in the markets and news services will carry stories of drought in North America and too much rain affecting quality in Europe. The conflict in the Black Sea needs to be watched. The ability of Black Sea wheat to be exported is important. Real developments in India need to be watched if the USDA confirms India needs to buy volume wheat it is bullish for wheat particularly Russian.
Mercantile says they have rarely seen the world in such a disarray. There are wars/disputes in various regions and strange weather conditions all making price forecasts extremely challenging, according to Mercantile. Futures markets are extremely volatile, but also thin. Meanwhile, there is a heightened sense of awareness in the market regarding the risks to Russian and Ukrainian exports, but there also is cognizance that harvest has arrived in Europe. With grain to be distributed, the market cannot stay paralyzed indefinitely. What is surprising to Mercantile is that buyers have been absent when Black Sea wheat is still cheap (Russian is wheat is ~$237/mt FOB) and given the uncertainties regarding forward logistics. Mercantile worries that financial problems are affecting overall demand, and this might render higher priced north American wheat hard to place. However, as far as Canada is concerned, Mercantile doesn’t suggest any cash sales while current weather conditions prevail.
Mercantile says crops in Canada and Argentina are struggling. India is poised to be a large wheat buyer, and China has been buying significant volumes. According to Mercantile, with this in mind, there are large stocks of wheat in the EU and Russia, and it seems as if credit issues are impacting demand. This lack of demand is an issue and North American wheat is expensive compared to other origins.
It will be a short week with U.S. traders on Holiday. In Mercantile’s view, futures still need some adjustment to line up with cash prices and North American seeded area. In Mercantile’s view, North American prices will not improve much until the New Year unless there is a major weather event.
It’s going to be all about weather, and how the market interprets events in Russia, according to Mercantile. In Mercantile’s view, such abnormal events will cause the futures markets to initially start a little stronger, then fade as the conflict will have no real impact on the overall wheat complex. Global wheat buyers remain uncovered. They are buying hand to mouth and using local crops where possible. Mercantile doesn’t think this will change. Stats Canada’s planting report is out this week.
Mercantile says demand remains slow as there is little (if any) new business. Black Sea prices remain at a considerable discount to North American future prices. Mercantile says, it is worth noting that funds were big buyers of new crop. The floor price for Russian wheat has dropped and as harvest approaches and storage is tight, we expect their low prices to continue for a few weeks.
According to Mercantile, it was the volume and price of Russian wheat offers to Saudi Arabia and to Egypt at $100 below Hard Red Wheat which took the market lower. The USDA WASDE report added to the weakness with a 10 million tonnes increase in world wheat production and 6 million tonnes increase in world stocks says Mercantile.
With the weather forecasts looking benign, Mercantile expects markets to go slightly lower. They have two markets: Futures represent the USA market, where growers are holding looking for better prices, and cash markets, which are much lower. Eventually, they must meet, and Mercantile doesn’t see much that will lead cash markets higher for the present. The weather needs to be watched, but at the present weather futures look average to better than the previous year, particularly in Europe says Mercantile.
Reports Mercantile receives from the country are generally good, but more rain would be liked on the Prairies. Mercantile expects futures a little lower but would hold cash wheat sales for the present.
Mercantile says current weather conditions are benign, and their reports suggest an average to above average global crop is possible. On the demand side, Mercantile believes there are poor local exchange rates and belt tightening keeps demand low. Currently Russian wheat is the cheapest milling wheat and best priced feed grain for many buyers, according to Mercantile. In the meantime, Mercantile expects futures to open initially stronger, but weaker by the end of the week, assuming no weather catastrophe. Mercantile would sell more spring wheat to 50 per cent committed.
Mercantile has not heard of significant cash wheat trades this week and they think world buyers are just about covered on old crop and are waiting before buying new crop at hopefully stronger local currencies. The change in the Russian export tax keeps the Europeans a little more bearish, and Mercantile believes U.S. grains remain expensive compared to other origins. Mercantile expects funds to add to their shorts. - It being a short week, Mercantile would leave markets alone.
Mercantile says there currently are few supportive news in the wheat markets. The wheat complex is facing high ending stocks in the EU and Russia and a potentially large global crop, which has European prices heading lower and dragging global prices lower according to Mercantile. The U.S. has been totally uncompetitive for weeks, so Mercantile doesn’t see any major North American cash shorts getting pushed around by some bullish U.S. crop reports, like the Kansas crop tour. According to Russian officials, Russia plans to harvest on average around 130 million tonnes of grain a year and to export up to 55 million tonnes, which will keep pressure on cash FOB/CIF prices. Mercantile needs generally poor world weather reports and/or stronger local currencies to promote buying interest in the short term. Mercantile believes Russia will continue to sell and lead wheat markets.
Mercantile does not expect world buyers to panic and buy wheat. Alternatively, they expect futures to trade in a narrow range while Russia chases more cash outlets at discount to U.S. futures. Mercantile does not expect the funds to buy in their wheat short while cash wheat is at such a discount to futures.
Mercantile believes the rally in futures is a good opportunity to finish old crop sales if not already done. For now, Mercantile thinks 2023 crops look big and local currencies are weak, so it is difficult to be sure of demand. Russia is very hard to predict, according to Mercantile, but they think Russia will be the cheapest cash wheat suppliers through the September-December period. Weather continues to create uncertainty.
Mercantile believes the trade market will be watching for the impact of the rain in the Southern Plains. Questions about plantings and moisture in Argentina andAustralia are offset by large wheat stocks in the EU and Russia that will carry into new crop and cushion potential weather problems though the year, says Mercantile. The Ukrainian export potential for the summer forward depends on the results of EU and Russian politics. Mercantile says the wheat market remains volatile and caught in politics.
Mercantile believes Russian new crop supplies should be ample, and prices are still attractive to Russian growers and assumes Russia will again be an aggressiveseller of wheat for the Sept. - Dec. period. According to Mercantile, the future of Ukraine’s wheat crop and their ability to move it remains difficult to assess. Rain in the U.S. will probably not change crop prospects there materially, and while conditions have improved, Mercantile says Canada still needs to get a crop in the ground.
While futures week over week were higher, Mercantile believes the cash trade was very slow and prices about unchanged. Mercantile says there are concerns about the Black Sea corridor closing, but this has not led to any new buying of wheat. Excess supplies in Russia and the EU will cap rallies nearby, but dryness in the U.S. Plains, Argentina and North Africa, spring wheat seeding concerns in the U.S. and in Canada, and risks to Australia from an El Nino argue for longer term support.
According to Mercantile, the funds and consumers are keeping their ownership of old crop to a minimum as they expect new crop will be available at lower prices. Weather continues to be a big factor of uncertainty and needs to be watched. From Mercantile’s perspective, new crop is undervalued considering how long it is before new crop grain is safely in the bin.
Canadian wheat exports in week 35 were 388.9k mt for a season total of 13.6 million bushels, up 73 per cent from last year.
Mercantile believes the market will center more on weather and what happens to the Black Sea corridor after the 60-day extension. It will be a short week in because of Good Friday. However, weather, Trump’s surrender in New York, and more on the banking crisis could keep markets volatile. Mercantile believes futures could gain a bit. – Mercantile is sold out of old crop and will wait before selling additional new crop.
The USDA planting intensions report is out on Friday. In Mercantile’s view, new crop values suggest more corn/spring wheat and fewer soybean acres. However, it remains to be seen what the USDA gives the market. Russian and its Black Sea politics will continue to play a major role as the Northern Hemisphere winter growing and spring planting seasons get underway. If China continues buying USA corn, Mercantile predicts futures will be higher.
Mercantile suggests Russian wheat continues to dominate the wheat trade. Russian farmers had a big crop, and they are strong sellers at current prices. With a new wheat crop coming shortly in Europe, Mercantile presently doesn’t see any independent strength in wheat. The wheat market will follow corn, which, in the short-term, will be following the pace of US export sales.
Stats Canada is showing that Canada exported 808.1k mt of durum during January 2023. This is a record monthly amount and especially strong for January when Canadian durum exports are usually at their seasonal low. Wheat was lower following the USDA report. The Russian delegation will meet with the UN to discuss their side of the Grain Corridor export deal on March 13th. Mercantile assumes the corridor is going to be left open. If left open, it is neutral to bearish. If it’s not, it is bullish. The exchange in local currencies is high, so demand will remain slow. Old crop carryovers will be at their minimum, putting pressure on any inverse according to Mercantile.
According to Mercantile, there seems to be plenty of wheat available to meet buyer’s needs. The Russian prices have fallen to a year low and yet there appears to be more for sale from Black Sea origins. All tenders that were called for were met successfully without the need for North American supplies. Mercantile expects the next WASDE report to increase the USA carryover.
According to Mercantile, there is little in the mix to support a rally in old crop wheat prices. The funds sold many of their long positions, and there is little to suggest them buying in. Mercantile said, there could be a rally in spring wheat as the chart looks oversold. If it does, any remaining old crop should be sold. The strong dollar is making purchases of North American grain difficult in local currencies. Mercantile hopes growers took their advice and sold old crop.
Sask Wheat's weekly wheat market outlook analyzes domestic and global factors that impact wheat prices and market access for Saskatchewan wheat producers. Marlene Boersch of Mercantile Consulting provides a weekly overview of the wheat market summary.
The wheat market outlook for September 20, 2021. The full report is available at saskwheat.ca.
The USDA report implies a further decline in US stocks next year, and while wheat does not have the same dynamics as corn and soybeans with respect to needing to buy acres, prices do need to stay higher to avoid using too much in feed rations. There also is a lack of moisture prior to seeding in the US Plains and in Canada, plus the lower HRS plantings number content that Minneapolis futures are undervalued at close to level money with CBOT.
Marlene Boersch of Mercantile Consulting provides a weekly overview of the wheat market summary.
Marlene Boersch of Mercantile Consulting provides a weekly overview of the wheat market summary.