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Wheat rallies then stalls

Wheat markets pushed to new highs for the move mid-week before running out of gas and turning lower, finishing the week with a net negative. Hard red winter is still the stronger market, with the spreads continuing to gain over Minn and Chicago.  

Argentine production problems were the main reason prices pushed higher early in the week. But we also heard rumors of Russian farmers not delivering on contracts as their domestic prices are now much higher than their contract prices. However, the Australian harvest is keeping prices in check. 

Argentine wheat prices are soaring into record highs, with some reports of up to $20/bu. Rumors of the government threatening to shut off exports further illustrated the runaway problem in South America’s major wheat supplier. There were reports that the government would actually sign off on imports of wheat from neighboring countries. Needless to say, the world won’t se export competition from Argentina for at least another year.

That also means that Brazil has to source its wheat needs from the broader market again this year, with most of their purchases likely continuing to come from the US (hrw). With Brazil’s own production problems and now Argentina’s, wheat demand from South America will remain strong for the next several months.

In Australia, production estimates are still in a pretty wide range for this late in the season at 22 – 25 MMT. Early quality reports suggested frost had taken a big toll but recent reports have shown much better wheat coming to market. 

Russia has been dealing with a series of issues lately. Harvest problems from too much rain then became planting delays for the same reason. And now, contract defaults by their producers who refuse to deliver wheat that was contracted at lower prices have put exporters in a bind, leading some to suggest that there could be defaults on export deliveries from Russia. 

Export sales reports continue to trickle in with number still big but lower than last week’s report. Nevertheless, US wheat export sales are still running well ahead of the pace needed to meet USDA’s projections, and we’ll likely see an upward adjustment in the Nov 8 supply/demand report.

India is about to re-enter the world export market with continued chatter that they will lower their floor price to $260/ton (from $300/ton). So far they’ve only offered 60 TMT at the old price, but the expectation is for eventually about 2 MMT at the lower price. This would make them competitive with the Black Sea. Even though India is only a feed wheat supplier, the increase in supply will likely have a negative effect on price action. 

Technically, chart formations looked pretty good on Wednesday as prices broke above notable resistance, but by the end of the week it looked like the market was running out of gas. Seasonally, the fall rally window will be closing quickly as Australia’s harvest hits the pipeline. 

Longer term, fundamentals still look good for this crop year and even more so for next year as planting problems in major producers Ukraine, Russia and China will eventually lead to lower production in those important regions. The tight supply situation with hard red winter should continue to support that market over Minn and Chicago at least through the spring.


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