This isn’t right – wheat prices are falling?

Grain | 26th June 2024 | By Andrew Whitelaw

The Snapshot

  • The wheat price rose dramatically over late April and May. It subsequently fell.
  • The rise was largely due to concerns about the Russian wheat crop.
  • The trade has a reduced concern about getting access to wheat.
  • The US conditions for both winter and spring wheat are the best in recent years.
  • The northern hemisphere weather window can provide strong pricing opportunities, but they can often be shortlived.

The Detail

The market never stays the same for long; a flat market seems to be quite rare these days. The wheat market has gone through a wild ride since April.

The December wheat contract (Chicago) aligns with our harvest. On the 17th of April, futures were at A$338, and they drove higher to A$410 by the 24th May. The market has since fallen from this peak to hit A$322 this morning.

The market rallied largely on the conditions in Russia, and that their crop was falling. The expectations are now for a crop below 80mmt.

This time of year can regularly provide huge pricing opportunities, but the opportunities can often be short-lived. The trade can often see a weather woe and react; this can be exacerbated if the speculators have a large short position.

The trade can then eventually become settled in the supply and demand figures. This is occurring at the moment, which is why we have seen such a large fall.

One of the drivers of global wheat markets is what happens in the United States. The conditions of their crops have been improving in recent weeks, with crops hitting lows for the seasons of 47% good-excellent in early June; they have now improved to 52% good-excellent.

This places the winter wheat crop in the best condition since 2019.

The US also has the spring wheat crop, and that is also ticking along with good conditions.

The US spring wheat crop is at 72% good-excellent, the best condition score since 2020. The spring wheat crop is a higher protein wheat.

When looking at selling grain, it is very hard to hit the top of the market. A large part of trading any commodity is psychological. We always run through the chart below with our clients to ensure they know where they are on the market path.

If a price opportunity presents itself, and the market rallies significantly in a short period of time – consider locking something in. You don’t need to do it all, just a small portion. If that small portion is your worst price for a season, then its not a bad trade. It’s all about getting a good average.