Agrifacts | September 2023 Your monthly roundup of news, prices and other farming matters This month’s grain market update is provided by ODA.
| Can Wheat Prices rebound? World wheat prices came back to their season lows this week and then rebounded on key support levels. We consider that the bearish wheat market trend is not justified by its own fundamentals. It is negatively influenced by large feed supplies and thus far, sluggish demand. But the milling market is tight. Prices could well rebound later in the season and quality premiums should remain much above average levels. There are three reasons for agricultural commodities to be going down over the last 15 months: •
First, is the combination of large feed supplies (corn, wheat, and barley) and sluggish demand (feed sector crisis).
•
Second, the very aggressive prices and large supplies from Brazil and Russia which have led to very slow export demand for US corn and soya along with EU milling wheat.
•
Third, Black Sea geopolitics have had, so far, very little positive influence on world markets, despite ongoing and growing risks. Record Russian exports combined with creative logistic solutions in Ukraine are currently amongst the main elements of pressure on international prices.
If we do not deny the heavy feed fundamentals, we still consider that these three bearish factors could change fast and take prices higher. Indeed, the USDA well supplied and bearish S&Ds are based on two major assumptions: South America will produce a record crop in 2023/24 and Black Sea exports will reach world markets without disruption. South American planting is just about to start, and conditions remain very dry, despite El Nino. Weather market will price any adverse condition. We will use our large South American network to be timely informed! The Black Sea is clearly becoming a war zone, and, at this stage, it is only escalating. Danube ports are bombed every week and Ukraine will do whatever is possible to destroy the Kerch Bridge. In these circumstances it is very probable that both Russian and Ukrainian exports will be significantly disrupted, at some stage, in the coming months. We do not know the date, but we know it is probably imminent. During the first two months of the season, Russian and Brazilian exports have been strong enough to apply downward pressure on world prices. However, they are losing competitiveness now and export demand will soon be back for EU and US origins. For the first time in 5 years, world wheat production is down YOY. Wheat ending stocks are at their lowest levels in 7 years. Quality wheat supplies are low with Northern Europe, Ukraine, and Canada reporting quality and yield issues. EU wheat is now more competitive and should attract more demand going forward. Ukraine exports are slower than needed. A perfect cocktail for a wheat price rebound. The trigger could come either from Black Sea logistics disruption, adverse South American weather or from Indian import needs… Markets are bearish, but the market story could change anytime! Sébastien MALLET, ODA UK