wheat

The two most important fundamental components of wheat are not necessarily common topics within coffee-shop talk, it is that

(1) both Russia and Australia have large enough sized crops to be able export volume (capped by capacity) right through respective 2023 harvests begin.  Cheaper price ensures this happens, Russia leads in Africa/Mid-East while Australia in Asia.
(2) user behavior has shifted to combat high price, part of it is deploy patience, even hope that a cheaper choice will become available.

Where domestic supply/demand imbalances exist, strong basis and futures inversions can do most of the work.  Can come up with a few reasons for modest strength including return of disruptive war or corn drought, but the likelihood of reversion to a price uptrend seems low.  Bounces yes, uptrend unlikely.

It’s too early to know if the Hard Red Spring wheat story is only about volume, protein or both.  Volume for sure as North American spring wheat beginning supply is poised to be the lowest since 12/13 (for now), but protein can come into play because US Hard Red Winter protein is weak.  The last US spring wheat wreck was 2017 and it was a low HRS & HRW protein year.  Stress ups odds for higher protein HRS outcome and can skew price discovery.  Typically when in prime weather chaos, going with perception of crop size getting smaller or bigger is useful.  But keep in mind that this isn’t the first high priced HRS rodeo that millers have been too, and that spring wheat is the only imbalanced world wheat class.

Research on this just completed.  Please contact me for more detail.

There’s a little more going on in wheat than meets the eye. It’s not the first time that Russia has initiated an export tax, last one being in Dec-2014, but market conditions then were different. Russia price grid adjusted inclusive of farmer accepting lower price because importers had ample wheat buying choices. Like most years, that was a supply-push year. Not so today. Most important observation is this. Statistics or supply/demand’s won’t convey it, but wheat market dynamics have shifted to a rare seller’s market.

Shoot me an email and I’ll send you the detail