Wheat Market Outlook

Mercantile says - arguably the most important takeaway from last week’s WASDE report was that global wheat stocks are at their lowest level since 2017/18. On the one hand, wheat markets face a strong U.S. dollar and an unsteady demand prole. On the other hand, 2025 exports from the EU & Russia could be 15 million mt lower than last year’s, while Indian domestic prices hit new highs, and their ending stocks look to fall below last year’s. According to Mercantile, the early reaction to Saudi Arabia’s wheat purchase seems to be supportive as the volume was larger than expected, and at a stronger price. Mercantile would hold sales for the present and they expect demand for wheat in the second half of the crop year to be good for North American wheat.

According to Mercantile, MATIF and U.S. futures found some support at the contract lows, but U.S. wheat is expensive compared to other origins. Black Sea wheat remains comparatively cheap, and Argentina is also working to take more demand, says Mercantile. Meanwhile, end users are not well covered, but they remain reluctant to buy as the very strong U.S. dollar and weak currencies of importing nations are not helping demand, according to Mercantile. Mercantile is 25 per cent sold at $8.00 and would hold additional sales for now.

Mercantile discusses how the wheat market is becoming increasingly complex. The global wheat production outlook is mixed. Political interference will be a major feature moving forward. There is uncertainty about the impacts of the Russian export quota, and the potential policies of the Trump administration. The very strong U.S. dollar and weak currencies in importing nations is not helping demand. However, wheat has become competitive to corn, which should support demand longer term.

According to Mercantile, wheat is drifting lower given the lack of supportive news. The Algerian tender two weeks ago, and the GASC tender this week, show that even with Russia out of the public tender business, there is lots of available wheat in the Black Sea. Mercantile says South American crops are coming online which will add to the competition. Mercantile adds there is uncertainty about how policies from the Trump administration will affect the U.S. dollar, trade, and the war in Ukraine, but the inauguration is not until January 20, 2025.

According to Mercantile, the U.S. election will be the feature of the week stating both candidates have campaigned on more protectionist policies, especially regarding China. Mercantile says Russian traders seem to have enough private business to keep them busy while the remaining Eastern European countries seem willing and able to fill the public business. In Mercantile’s opinion, wheat lacks independent strength and will largely remain rangebound. Mercantile also has a new WASDE report on Friday. They recommend targets to sell 25 per cent of your wheat production at $8.00/bu for a #2CWRS (depending on your location).

According to Mercantile, Black Sea wheat remains the cheapest in the world, and Russian traders appear to be willing to ignore the government’s price floor. Wheat markets benefitted from the strength in corn and soybeans, but with little independent strength, Mercantile assumes wheat will be confined to a sideways range for now. Mercantile recommends targets to sell 25 per cent of their wheat production at $8.00/bu for a #2CWRS (depending on location).

According to Mercantile, Russian officials seem determined to tighten controls on the wheat market. Early indications are that traders are complying, but even with the increase in prices, Mercantile says Russia remains one of the cheapest origins for wheat on a FOB basis. Mercantile says the amount of relief (or lack there of) the rain brings to the winter wheat areas of the U.S. and Russia will be watched.

Mercantile recommends selling 25 per cent of your wheat production at $8.00/bu for a #2 CRWS

According to Mercantile, the trade will be watching the dryness in the U.S. winter wheat belt as well as how much relief the rain will bring to the Russian winter wheat crop this week. The trade is not certain how the recent Russian restrictions will impact trade, so this will be a feature moving forward. Mercantile would sell 25 per cent of spring wheat at $8.00 per bushel 2CWRS 14.5 percent protein.