The screen is mostly red this morning, some upside in Paris corn futures, but otherwise almost every other international grain futures contract is lower. Chicago wheat slipped, dragging FOB offers lower for US product.
US product had become expensive, the HRWW product was not competitive into Asia. The punters had backed the assumption that a prolonged Black Sea access issue would push the consumer to the US for wheat. Looking at weekly export shipments and sales volume for US wheat, it’s pretty obvious that this did not occur. Now we have Aussie headers in the field, and Argentine headers ready to roll, and the US realised that HRWW out of the PNW into the Asian market was a little high, but not anymore.
HRWW C&F Asian consumer is valued at roughly US$306. This is lower than Canadian US$316, Argentine US$351, Australia US$334 and French US$335, milling wheat by a significant amount. One would think this should stimulate US export sales.
The thing that is tempering the appetite of the consumer is the thought, or wish, that Black Sea wheat will suddenly appear in volume again. This is looking unlikely, but given how things can unfold under the Trump administration who the hell knows.
Currently we see Black Sea milling wheat at a value of something close to US$210 FOB. It’s the execution costs that are the issue, or the ability to execute. The Black Sea FOB value reflects their domestic markets, which have crumbled on the back of huge supplies and increasing ending stocks, but also due to the cost of competitively executing this grain from much more expensive FOB ports than their own Black Sea ports.
What the trade can’t extrapolate is how much the Black Sea domestic price will rally if there is a resolution. This is a huge opportunity for the “trade” to buy cheap Black Sea wheat, store it up country and wait this out, potentially, maybe……well if they have deep pockets, and can trust these governments……… yes, a big call. If for some reason the government ends up owing this grain, the consumer is unlikely to capture the benefit of the current Black Sea price.