I don’t know how small a US wheat crop needs to be, or how dry it needs to be in France, or how many bombs Ukraine and Russia needs to exchange, to sustain a wheat rally, but if obviously has to be much worse than what we are seeing now.
We started the US marketing year with the worst winter wheat crop rating in years, decades even. The market responded, initially, before realising that the US was still going to produce enough wheat locally to satisfy their needs and still have a +21mt of wheat available for export, and still carry out 20mt. But hey, it’s all China and Russia’s fault.
Russia, yeah fair enough, they are big exporters, but China, yeah nah. Yes 122mt of carry in is a lot of wheat for China to start with. Be it in the form of mouldy piles in mouse chewed bags or not is irrelevant, it’s on the balance sheet. Yes 141mt of wheat is a lot of wheat to produce, but so is 148mt of consumption. If you look at the recent rainfall for China it does tend to raise the quality question on quiet a few million tonnes of wheat too.
That aside the question is why is the price of world wheat still falling. The further we get into the northern hemisphere summer, the further we get through or closer to harvest. The more the unknown becomes the known, risk is removed from the market. So just how much of the current price is “risk”. With the French wheat crop that far advanced it is now seeing no benefit from rainfall, as would much of the Russian wheat crop. We are mainly seeing northern hemisphere spring wheat exposed to weather premiums and the southern hemisphere crops in Australia and Argentina. About 12% or 13% of world production.
That being said Australia has had a bigger turnaround than I’ve seen in recent state of origin games and Argentina is coming off a record crop last year and back into an average crop of about 21mt. That leaves Germany and Poland winter wheat in the short term, and Russian and Canadian spring wheat in the mid term. Nth Europe is looking good, NW Russia good, maybe a bit wet, no cause for alarm there. Russia / Kazak spring wheat area is questionable given how wet it’s been (rain makes grain) and N.America has gone from too dry to perfect or maybe even too wet in places. The risk is well out of the wheat market now.