Wheat Market Outlook

Mercantile expects wheat futures to continue sideways. They think the wheat market is supported but will have difficulty moving higher while corn remains under pressure. Traders will watch the Southern Hemisphere weather and focus will be on the Northern Hemisphere for winter crop development and spring crop planting. If attacks continue in the Red Sea, we may see cash C&F prices move higher.

Mercantile’s Outlook This Week: The markets are closed today for Martin Luther King Jr. Day. We do not expect much of a decline in wheat during the week. In fact, we expect wheat to show some strength. Funds will continue to buy in their short. But we don’t expect a decline in Black Sea cash offers. Algeria tenders Tuesday for its April soft wheat requirements and it will be interesting to see wha...

The next USDA report is out on Friday (Jan. 12, 2024). Mercantile says the trade is expecting a smaller winter wheat seeded area. Cold temperatures in parts of Europe, and excessive moisture in parts of the EU are giving rise to some production questions, but harvest in the Northern Hemisphere is still over five months away. Consumers are buying as needed and see no reason to extend coverage beyon...

From Mercantile’s perspective, Saudi Arabia’s tender was unexpectedly large, but the price does not support North American execution. Traders are going on holidays, so futures markets will be thin until after Christmas.

Mercantile says Russia continues to be the dominant force in the wheat market as shown by its performance at the GASC tenders. According to Mercantile, Chinese buying is supportive should it continue. Chinese holidays will have them away until Jan. 15, 2024. China remains the largest customer for Canadian wheat, but at 539k mt, exports to China are just 51 per cent of last year’s volume year-to-da...

Mercantile says there was evidence of Fund buying as they start to cover their short. Mercantile does not expect too many moves and the volume will be light as we move towards Christmas. Mercantile has several important reports coming in this week (Australian numbers, Stats Canada, USDA reports), and they do not expect these reports to be bearish. Wheat sales to China are supportive and if Funds c...

In Mercantile’s view, corn and wheat should be higher based on demand, unsettled politics, and weather in the Southern Hemisphere. – They do not expect to extend cash wheat sales until the New Year.  

It is a short week in the U.S. due to the Thanksgiving holidays. Mercantile believes wheat may go lower while the EU needs to sell against the Russian competition. Mercantile does not expect to see much from the funds, although they say it was interesting to see them short cover some last week. The disputes in the Ukraine and Gaza remain and may affect the markets.

According to Mercantile, the funds are maintaining a large short position, but there was nothing in the USDA report to cause them to change course. Russian wheat remains the cheapest for most of the potential importers, and weak currencies against the dollar remain negative to demand, Mercantile says. The trade will be watching the harvest results in the Southern Hemisphere and Chinese wheat deman...

Mercantile expects it will be a slow week with a new WASDE report due on Wednesday. Buyers might hope that wheat prices are lower due to the Russian duty reduction, however, Mercantile does not think so. According to Mercantile, wheat is struggling for fresh input amidst a visible lack of demand, while the funds still hold a near record short, and there are planting issues in parts of Europe and S...

According to Mercantile, the Funds are carrying a large short position in wheat, but there is nothing currently in the mix to push them to reverse this. Mercantile expects prices to be lower as pressure continues from the U.S. corn harvest. Further forward, Mercantile sees firmer levels when the harvest is in the bin. Weak local currencies will keep prices low for the present while the Russians co...

Mercantile says the funds are short and believes more buying by China must be a concern to them. Currency remains a restriction to demand. South American weather, Ukraine logistics, Chinese demand, and a widening window for U.S. exports of wheat will be the market drivers according to Mercantile. In Mercantile’s view, wheat is getting too cheap, so they still think holding to the New Year, when th...

In the short term, Mercantile see futures trading in a narrow range and growers being reluctant sellers at current returns. According to Mercantile, Russia will continue to be the most aggressive seller as, in their opinion, the price is not too bad, and they need the dollars. It is difficult to forecast events for Mercantile when they do not know how the events over Hamas/Israel will develop. But...

According to Mercantile, traders are working through the several unusual dynamics in the markets. Mercantile does not expect much change during the week, especially since they have a new WASDE report coming on Thursday. Mercantile prefers to hold additional sales this week given the number of unusual occurrences happening, and a new WASDE report which could be slightly bullish. Mercantile would no...

Mercantile says wheat markets crashed when the USDA’s Small Grains Summary put wheat production much higher than the trade expected. Russian wheat is still talking most of the export demand. Although Russian export price schemes continue to create confusion in the market, it seems like the Russians have lowered their floor price according to Mercantile. Mercantile does not see much reason for bett...

Mercantile believes North American wheat remains too expensive except for special hard wheat buyers. The stock position will be important for future direction. Year to date usage remains low according to Mercantile. The Russian crop is large and storage problems will force sales there. Mercantile expects that futures will continue to fall in the short-term, and then improve in the New Year. Mercan...

In Mercantile’s view, the WASDE report was constructive for wheat. However, exports year-to-date are disappointing and some will question the USDA’s export forecast as being too high. Nevertheless, we ‘might be’ at a tipping point in the wheat markets. Over much of the summer, consumers have taken advantage of declining spot prices to lower their buying average. Seasonal upswings from this point i...

Mercantile says the focus of the markets will be the USDA-WASDE reports next Tuesday. The seasonal tendencies for wheat prices to rise into the winter and the anticipation of reduced Southern Hemisphere and Canadian supplies are the main bullish motives in coming weeks, according to Mercantile. The counter arguments are that this is already priced in with the large carries in the cash and futures...

The fund position across the three wheat futures markets is now a combined short of 95k contracts, but still well below the deepest short they have held of around 150k contracts during 2016-2017 according to Mercantile. The wheat market remains quite complicated, and both bearish and bullish arguments can be made. For example, the bears in the market point to the boundless flow of four million mt...

The Sask Wheat market outlook for August 28, 2023.

Mercantile says, Russia continues to push wheat into the market while buyers are being very cautious in their buying and remain so in a falling market. However, Canada, Argentina and Australia all now have significant crop concerns, which along with a potentially significant major import program by India could materially change the market in the latter half of the season, according to Mercantile. ...

According to Mercantile, Russian/Black Sea wheat sales levels remain below North American levels.  On the demand side, Mercantile thinks financials are pressuring new buying and harvest pressure is keeping prices lower. Spring wheat remains too high compared to Chicago futures in Mercantile’s opinion. However, if you don’t have cash flow needs, Mercantile would put grains to storage and wait for h...

Mercantile says North American cash and futures prices need to go lower to be competitive with other competing origins. The premium of spring wheat over lower grades remains too high and must go lower according to Mercantile. Weather will provide volatility in the markets and news services will carry stories of drought in North America and too much rain affecting quality in Europe. The conflict in...

Mercantile says they have rarely seen the world in such a disarray. There are wars/disputes in various regions and strange weather conditions all making price forecasts extremely challenging, according to Mercantile. Futures markets are extremely volatile, but also thin. Meanwhile, there is a heightened sense of awareness in the market regarding the risks to Russian and Ukrainian exports, but ther...

Mercantile says crops in Canada and Argentina are struggling. India is poised to be a large wheat buyer, and China has been buying significant volumes. According to Mercantile, with this in mind, there are large stocks of wheat in the EU and Russia, and it seems as if credit issues are impacting demand. This lack of demand is an issue and North American wheat is expensive compared to other origins...