While we wait for the updated WASDE and Grain Stocks report, there is a third piece that will also be watched...Wheat Seedings. This report, which was due in January during the shutdown, gives us the first look at where wheat acres will be for the year, given the limited amount of fall field work that took place (wheat planting included). This number will be of great interest, given that the USDA's fall baseline for acreage favored a shift of acres from soybeans to wheat and corn. See Table Below.
Globally, wheat supplies remain large (see most recent stocks to use vs supply chart below). While inventories are vast, the role of "chief supplier" is finally seeing a changing of the guard. Russia has been the low price setter and the dominant seller this entire crop year. However, a tender for purchase by GASC (Egypt) last week pushed Russia to the sidelines as France and Romania split the business with a more competitive bid. It was the first time in 18 months that France has sold GASC. This was not a matter of French wheat prices falling, but rather Russian prices rallying. U.S. SRW was the cheapest FOB price, but it was un-competitive on a delivered basis.
As has been the case most of the year, U.S. futures will have to drop back close to $5 before we will capture any "cheapest wheat" business. Along with Russia, Ukraine is the other major Black Sea wheat exporter. At the beginning of this crop year, many stories took the conversation back and forth as to whether or not exports would be restricted. In the end, both the government and the exporters agreed that they would not export more than 8 MMT of milling wheat and 8 MMT of feed wheat.
While the shipping statistics don’t yet show it, the government told the exporters 10 days ago that they had already sold 85% of their milling quota. It may be only a matter of time before the US begins to get the nod from foreign buyers. Given our supply of wheat, this would be welcomed news, especially if seedings come in lighter than expected. It may be just what the market needs to see some higher opportunities. However, given the vast supplies, also recognize the risk that comes with such price elevations. Contact us to sort through your situation and develop strategies accordingly.