Harvest quality plagues wheat
The CBOT Dec ’24 wheat contract remains stable week-on-week, despite minor production adjustments in Canada, France, and Germany. Although the contract has lost nearly 100c/bu since January, this week’s lift is a relief from a steady decline. Canadian spring wheat was reduced by 1.2mmt due to drought, while French and German wheat production also fell short of expectations. Despite these cuts, demand remains weak, especially as China curbs barley and sorghum imports to manage oversupply.
This week’s lift in futures has been a welcome reprieve from what seems like a constant drain lower. For the month of August, CBOT Dec ’24 has only lost 3c/bu but has had a trading range of 44c/bu from the monthly highs to the monthly lows. For reference, the Dec ’24 contract has lost nearly 100c/bu since the start of the year. With any sort of luck, we might be seeing the wheat price starting to level out as the Northern Hemisphere harvest winds up.
After a hot and dry summer period, Canadian spring wheat was trimmed by 1.2mmt to 25.4mmt, down 100kmt on last year and well below previous estimates. All wheat production at 34mmt still holds its head above last year courtesy of an improved durum production figure.
France AgriMer reports that the French harvest was seen as falling short of five-year averages for both test weight and protein. It is estimated that only 25% of the country’s crop will make milling export quality due to poor test weights and only half the crop is meeting trade specifications (11.5%) protein levels. Argus estimates French wheat production at 25.2mmt which is nearly 10mmt below last year’s crop and represents a 27% drop on the five-year average.
Separately, Germany’s Ag ministry reported all-wheat harvest in the EU’s second-ranked grower at 18.8mmt, below USDA estimate of 20.3mmt with expectations of a dip in quality as well. In total, the EU Commission has cut a further 4mmt from the bloc’s production in the last month.
The flip side to all this is that demand continues to lag. Bloomberg reports that Chinese buyers have been instructed to buy less barley and sorghum “to ease domestic oversupply and bolster local prices”. The timing is thought to impact supplies from November onward, with existing sales not affected by the State directive. It will be interesting to watch demand going forward. It could be a classic false flag headline aimed at lowering prices and allowing the buyers an opportunity to buy. However, if we were to see subdued demand from China – on top of high supply – it would complete a very bearish scenario for feed grains. Things can change quickly, with 2 cargoes of US sorghum confirmed to have been sold to China this morning.
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Source Link : https://mecardo.com.au/harvest-quality-plagues-wheat/
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