Market Morsel: A rocket under wheat pricing.

Grain | 26th April 2024 | By Andrew Whitelaw

Market Morsel

It’s that time of year again. The northern hemisphere weather window is here, and it provides some fireworks.

In the past week, we have seen wheat futures for December rise to A$373 from A$338 a week ago. That is a very pleasant rise.

So, what is driving the current rally?

  • Dry weather in Russia is starting to cause concern, and they are the world’s largest exporter, so it will influence the market if they fall behind.
  • Large parts of the US wheat belt are drying out, with the winter wheat crop currently at 50% good/excellent.
  • Speculators had been short on wheat, betting on it falling further. Recent concerns and pop in the market have led to a short-coverage rally where those betting on a fall have to buy back their positions.

This is all great news for farmers in Australia as we start to seed. The volatility will be in the market for some time, and a timely rain will cause this market to fall – but with the increased introduction of La Nina, that can create further dryness in parts of North America.

The rise overseas is not flowing through to Australia as a dollar for dollar, but that is not to be expected when the futures market rallies.

Keep your seat belts buckled, it’s going to be interesting. The market will be looking at the weather, and that will drive the trades.