Wheat Market Outlook

Mercantile says there currently are few supportive news in the wheat markets. The wheat complex is facing high ending stocks in the EU and Russia and a potentially large global crop, which has European prices heading lower and dragging global prices lower according to Mercantile. The U.S. has been totally uncompetitive for weeks, so Mercantile doesn’t see any major North American cash shorts getting pushed around by some bullish U.S. crop reports, like the Kansas crop tour. According to Russian officials, Russia plans to harvest on average around 130 million tonnes of grain a year and to export up to 55 million tonnes, which will keep pressure on cash FOB/CIF prices. Mercantile needs generally poor world weather reports and/or stronger local currencies to promote buying interest in the short term. Mercantile believes Russia will continue to sell and lead wheat markets.

Mercantile does not expect world buyers to panic and buy wheat. Alternatively, they expect futures to trade in a narrow range while Russia chases more cash outlets at discount to U.S. futures. Mercantile does not expect the funds to buy in their wheat short while cash wheat is at such a discount to futures.

Mercantile believes the rally in futures is a good opportunity to finish old crop sales if not already done. For now, Mercantile thinks 2023 crops look big and local currencies are weak, so it is difficult to be sure of demand. Russia is very hard to predict, according to Mercantile, but they think Russia will be the cheapest cash wheat suppliers through the September-December period. Weather continues to create uncertainty.

Mercantile believes the trade market will be watching for the impact of the rain in the Southern Plains. Questions about plantings and moisture in Argentina and

Mercantile believes Russian new crop supplies should be ample, and prices are still attractive to Russian growers and assumes Russia will again be an aggressive

While futures week over week were higher, Mercantile believes the cash trade was very slow and prices about unchanged. Mercantile says there are concerns about the Black Sea corridor closing, but this has not led to any new buying of wheat. Excess supplies in Russia and the EU will cap rallies nearby, but dryness in the U.S. Plains, Argentina and North Africa, spring wheat seeding concerns in the U.S. and in Canada, and risks to Australia from an El Nino argue for longer term support.

According to Mercantile, the funds and consumers are keeping their ownership of old crop to a minimum as they expect new crop will be available at lower prices. Weather continues to be a big factor of uncertainty and needs to be watched. From Mercantile’s perspective, new crop is undervalued considering how long it is before new crop grain is safely in the bin.

Canadian wheat exports in week 35 were 388.9k mt for a season total of 13.6 million bushels, up 73 per cent from last year.

Mercantile believes the market will center more on weather and what happens to the Black Sea corridor after the 60-day extension. It will be a short week in because of Good Friday. However, weather, Trump’s surrender in New York, and more on the banking crisis could keep markets volatile. Mercantile believes futures could gain a bit. – Mercantile is sold out of old crop and will wait before selling additional new crop.

The USDA planting intensions report is out on Friday. In Mercantile’s view, new crop values suggest more corn/spring wheat and fewer soybean acres. However, it remains to be seen what the USDA gives the market. Russian and its Black Sea politics will continue to play a major role as the Northern Hemisphere winter growing and spring planting seasons get underway. If China continues buying USA corn, Mercantile predicts futures will be higher.

Mercantile suggests Russian wheat continues to dominate the wheat trade. Russian farmers had a big crop, and they are strong sellers at current prices. With a new wheat crop coming shortly in Europe, Mercantile presently doesn’t see any independent strength in wheat. The wheat market will follow corn, which, in the short-term, will be following the pace of US export sales.