Grain Market Update - Wheat (July 2024)

Article written by: Michael Jones, Grain Focus, Young

As shown in the graph below, wheat markets shot sharply higher in May before tumbling lower in June. During May there was a lot of concern about the state of the southern Russian and Ukrainian wheat crop as they suffered from dry conditions and frost. Russia accounts for 25% of global wheat exports so anything that threatens their crop translates to smaller supplies available for importing countries. Fears of these crop losses subsided in June as some rain arrived and crop size estimates stabilised. Still, Russia’s wheat crop will be 10-12mmt below what was expected just a few months ago. The US southern wheat harvest also got off to an early and quick harvest in June. US yields and quality have been good and harvest pressure weighed heavily on that market. US winter wheat harvest is now past the half-way mark.

Global wheat stocks are comfortable, but the stocks held by the top 8 exporters is more important to price and are at the lowest level since 2007. The market seems to be ignoring this fact for now as northern hemisphere harvest replenishes short-term supply.

APW1 Multigrade wheat bids for the 2024/25 season was sitting at $360/mt Port Kembla, at the time of writing. Looking at a 10-year price range, this is close to Decile 7. But based on a 5-year range (which is more reflective of the current cropping cost structure) it is only at a Decile 3.

Domestic markets are not having an influence on local wheat prices currently. Basis is at +$35/mt over US prices, compared to the 10-year average of +$46/mt.

Here are some watch points for the next few months which may provide direction for the wheat market.

Upside potential

• Major exporters’ wheat stocks are very tight.

• The European harvest is just beginning. A wet and cold growing season may result in disappointing yields.

• Turkey has currently banned wheat imports until Oct 15 to support local prices for their growers. They may have to lift this ban before then if supply becomes too low.

• India’s wheat stocks are very low and they have placed limits on stock levels that companies can hold to prevent hoarding. They may start importing wheat this year and have previously bought our APW1.

• Hot and dry weather has been seen in the Russian spring wheat areas recently which may damage that crop. It is much smaller than their winter wheat crop, but any yield loss could be another blow to their total crop size and therefore potential export volumes. It may also lead to intervention by the Russian government to control domestic prices.

Downside potential

• As wheat competes against other grains in the stockfeed market, it also follows the trend of other grain prices, particularly corn. The US corn crop (which is approx. 350mmt) is progressing well and so far there is nothing threatening a big harvest starting in August.

• Eastern European wheat harvest may come in at average or better yields which could offset the expected poor yields in France.

• The Canadian crop is in good shape so far.

The information contained in this article is given for the purpose of providing general information only.