Supply

France

Wheat plantings are running at 83% complete, down from 99% at the same time last year.
The crop is also suffering, with 73% being rated good/excellent, down from 75% the week before. This decline was caused by continual wet weather.
This will no doubt keep the 2020 production guessing game well and truly alive.

Argentina

The Buenos Aires Grain Exchange reports that harvest is 46% complete, with estimated production this year at 18.5m tonnes vs. the 19.5m tonnes seen last year. This decline in production also stems from dry and then wet conditions.
The political uncertainty of potential export taxes impacts how severely we will see exports affected by this.

Canada

Statistics Canada estimate that in 2019, all wheat production will be at 32.348mmt compared to the pre-report trade estimates of 32.6mmt (32.201mmt in 2018).

China

The world’s largest producer, consumer and stockist is expecting a 2019 crop of 133.59m tonnes compared to the 131.4m tonnes seen last year.

Demand

Egypt

The world’s largest wheat importer purchased 295k tonnes of Russian wheat, which will be shipped between 21^st-31^st Jan at US$235-236/mt, including freight.
This is $3-4/mt higher than Egypt’s last tender, continuing their buying trend and confirming the increased global export prices.

Algeria

Algeria recently purchased 500k tonnes of wheat for a Feb ’20 delivery optional origin. It is most likely and usually French, but interestingly, the could potentially besome Argentinian this time around, showing real trans-Atlantic export competition in the large North Africa market.

Kazakhstan

They may import up to 1.4m tonnes (up 75% from last year) of Russian wheat following their drought-stricken smaller crop of 11.5mmt, compared to 13.95m tonnes in 2018.
Satisfying this demand will drag Russian wheat inland and away from the Black Sea export markets.

Ukraine

They have exported 13.6m tonnes of wheat so far this marketing year from June, contrasting with the 9.5m tonnes in the same period last year.
This pace will surely slow somewhat over the coming months.

The Drivers

Funds are reported to have turned net long from a short position last week in Euronext Paris wheat futures, as well as increasing longs in CBOT SRW 18,008 lots as at 3^rdDecember 2019 compared to 8,359 the week prior. Funds reduced their Kansas HRW short to -14,481 lots as at 3rd December 2019 compared to -17,020 in the previous week. In Minneapolis, HRS the funds added to their already large short positions to -22,526 lots compared to 20,579 lots the previous week.
Last week saw some real downward pressure on some wheat markets, but with the monthly US Department of Agriculture (USDA) World Agriculture Supply and Demand Estimates (WASDE) report due for release on Tuesday 10^th December, we will get a new steer on prices.

We expect to see a mild reduction in burdensome global wheat stocks, current USDA is 288m tonnes, with trade estimates suggesting 286m tonnes in the upcoming report.

We are rapidly approaching the 15^th December deadline for a US/China ‘phase one’ trade deal to be signed, or the next round of US tariffs come into play. China last week partially waived soybean and pork tariffs, which is an encouraging sign, or just proof that they need the imports! Will we see pen-to-paper signatures or a continuation of the ongoing rumour mill? Any deal is likely to be a good deal for the grain markets.

Jolyon Hobby

Growing up on a Wiltshire farm sparked my passion for agriculture. With a BSc Hons in Agriculture and Land Management, I farmed for three years before diving into a 20-year career in the UK grain trade.

In the past eight years, my focus has shifted to the agri-food supply chain, where I focus on understanding the impact of commodity price volatility and transport logistics on the food chain. My expertise now lies in analysing global wheat markets and providing support to businesses across the entire spectrum – from farm to retailer.