Posted on December, 6, 2024 at 09:09 am
Another week of roughly sideways trading in the wheat market. There have been some minor adjustments to crop size, but the weight of selling as the Northern Hemi-sphere farmer gets their cash flow needs met before Christmas, is largely keeping a lid on prices.
A report out of Moscow this week indicates that the Russian winter wheat crop is in the poorest shape in decades. At 37% poor and only 31% good (compared to 74% good last year) the crop will go into dormancy with a big question mark hanging over its head. When you also consider the winter wheat area is down somewhere between 600k and 1000k ha due to poor farm economics, next year’s Russian wheat crop could be significantly smaller than what we’ve become used to.
Moscow has also confirmed that an export quota will be in place from 15 February until 30 June ’25. A maximum of 11mmt is to be exported compared with the 23mmt exported during the same period last year. Assuming logistics allow, I would expect that demand for Russian wheat will continue at pace in order to beat the upcoming quota limits.
It’s funny how the market reacts to rumours, and then can have a complete counter-reaction to the actual event. Buy the rumour, sell the fact. This week, the market caught a hint that the Canadian crops would be revised higher. This caused some weakness in the market, countering the Russian story. Last night, StatsCan published data showing that both canola (-7%) and barley (-8%) were down significantly year on year, and while wheat was up 6%, it was not as high as expected. Cue a nice little rally in CBOT.
There is also talk that the Canadians are already factoring in the US import tariffs as a given. To this end, it is thought that the canola area could suffer. There is a long time to go before the Canadian farmer has to finalise their cropping plans. A good rotation is good risk management and good farmers know it is unwise to make future decisions based on today’s prices.
Source: Mecardo