Some squaring up in the Chicago wheat pit saw SRW and HRW futures rally a little in overnight trade. Punters have long held a significant short and USDA reports are renowned for creating market moves, sometimes against the trend at the time.
Fundamentally wheat hasn’t seen a lot of bullish news in the short term, Aussie and Canadian crops simply get bigger and bigger. Importers like Brazil are tipped to import the lowest level of wheat in years and the Black Sea states remain very competitive on the global market thanks to big crops and low exchange rates.
The only thing that can help pull wheat out of this downward spiral at present is export business and at the moment Aussie wheat is priced competitively enough to keep US and Black Sea wheat out of the Asian markets. Black Sea values are close to where they have been all year, around US$180 / tonne. With Saudi in for 700kt of hard wheat over the next few days it will be interesting to see if Aussie wheat can get a slice of the tender. This result will undoubtedly help direct out domestic hard wheat values once the harvest pressure subsides.
India have also confirmed it will remove the 10% import duty they have on wheat. India is expected to import around 5mt of wheat this year, much of this will come from Australia with good orders already in the pipeline.
So as bleak as the outlook appears for wheat we do seem to be establishing a floor at current values, but the WASDE report may change that.