Wheat Market Outlook

According to Mercantile, futures markets remain under seasonal pressure. Global crops remain large, but Mercantile says slow harvest progress and limited farmer selling is driving a wedge between futures and cash prices. Given the various quality issues in Europe and the premium in cash markets over futures markets, Mercantile would hold sales for now.

According to Mercantile, the concerns about the protein content of French wheat in the wheat market remainin place, and Balkan wheat hit season highs due to strong demand by both EU and non-EU destinations. In Russia, Mercantile says values continued to rise within ongoing yield and quality concerns in the south, a slow harvest and strongfarmer retention. Mercantile continues to watch theweather/crop conditions, while there have been more quality concerns popping up. Old crop sales should be done, with around 25 per cent N/C sales on the books.

While wheat markets do not look exciting to Mercantile because the demand side remains tepid and hard to define for the coming crop year, they do note that there seems to be room for high protein wheat once again. In the ongoing crop year, demand for good quality protein wheat confirmed good demand for Canadian wheat. This year, we see German wheat come in with lower pro than normal, while once again seeing quality concerns with French wheat, and some concerns with Russian wheat. Mercantile says this will not fuel a change in overall price trends for wheat but should support a good premium for high quality/high pro wheat in the markets and support demand for Canadian product(all assuming we get off with good quality). Mercantile will be watching out for occasional premium selling opportunities.

Mercantile is watching the ongoing heat in Europe, where temperatures are expected to climb again mid-week. Protein seems to be the immediate problem with wheat, and Mercantile is watching yield outcomes in the EU and in Russia where there are questions about the crops in the Rostov and Volga regions (Mercantile says Siberia seems to look good). Mercantile would hold sales for now.

According to Mercantile, the market is not expecting any major changes in the USDA stocks and seeded area reports out today. Despite a weak U.S. dollar, slow harvest andweakening crop conditions, U.S. wheat prices will remain under pressure as crops in competing origins are harvested and are generally strong. Rain will drastically improve the condition of the crops in Saskatchewan and Alberta, sothere is less of an issue there. Strong export performance will whittle away at stocks and lower seeded area heightens the importance of a good crop in Canada. Spring wheat looks largely rangebound for now.

According to Mercantile, the weather and political uncertainty are supportive for the markets. The market is watching the dry conditions in Russia and the EU. Meanwhile, estimates for Russia’s wheat crop remain big. Mercantile says there was good tender business last week, but the results continue to signal strong supplies in the Black Sea and Balkans. Meanwhile, spring wheat crops in the Northern Hemisphere, especially Canada, are facing weather challenges. Mercantile would not sell wheat for now.

Mercantile says harvest of, what is expected to be a strong new crop in the Northern Hemisphere, is approaching rapidly. Dry conditions in the northern U.S. and Canadian prairies are supportive for high protein wheats, but this can be eased with rain. Mercantile would be sold out of old crop wheat and would hold new crop wheat sales for now.

According to Mercantile, futures markets are acting like they have founda bottom. Meanwhile, cash markets are being pressured by the volume of new crop wheat that is jostling for demand. Increasingly dry conditions in the Canadian prairies have the market on edge, says Mercantile. The next USDA report is out on Thursday. Traders expect the USDA will increase U.S. wheat stocks for ‘24/25 while lowering them for ‘25/26, while global ‘25/26 stocks are expected to be lower. Mercantile would not sell wheat for now.

According to Mercantile, thin demand ahead of the Northern Hemisphere harvest is presently the prime focus, but hi-pro supplies in North America is dwindling, and the new crop could be under threat. Building heat and dryness in the Northern U.S. shocked initial U.S. Spring wheat ratings, while there is no visible change to the dryness in China. Meanwhile, Mercantile says India is projecting a record crop. Mercantile would look for hard wheat to go higher.

According to Mercantile, there is an increasing number of production challenges arising, and the wheat market will increasingly focus on the weather. Mercantile says the trade is watching how production issues in some areas (Russia, China), will come against strong crops in other regions (the U.S., eastern Europe). Mercantile would continue to hold wheat sales for now.