Global wheat market: spring wheat rises and falls, but the tone of the bull market remains unchanged

 

On Friday, the Chicago Board of Trade (CBOT) December soft red winter wheat futures fell by about 6.
25 cents or 0.
8% from a week ago, to close at 766.
50 cents per cat
.
The December hard red winter wheat futures on the Kansas City Futures Exchange (KCBT) closed at about 778.
75 cents/bus, down 7 cents or 0.
9% from a week ago
.
The December hard red spring wheat futures on the Minneapolis Grain Exchange (MGEX) closed at approximately 1009.
50 cents per bus, down 42.
75 cents or 4.
1% from a week ago
.
Euronext's March 2022 milling wheat period reported about 282.
75 euros/ton, an increase of 3.
75 euros or 1.
3% from a week ago
.
The spot price of Argentine wheat is US$315/ton, up US$8 or 2.
6% from a week ago, FOB price
.

 

　　On Friday, the US dollar index closed at 94.
22 points, up 0.
1% from a week ago
.

 

　　Tightening supply and demand, global wheat prices rose for the fifth consecutive month in October

 

　　The Food and Agriculture Organization of the United Nations (FAO) said on Thursday that global food prices rose for the third consecutive month in October, setting a new 10-year high due to rising grain and vegetable oil prices
.
The FAO Food Price Index in October averaged 133.
2 points, the highest value since July 2011, a year-on-year increase of 31.
3%
.
The FAO Grain Price Sub-Index rose 3.
2% month-on-month in October, mainly due to a 5% increase in wheat prices
.
In fact, wheat prices have risen for five consecutive months and hit the highest level since November 2012
.
Major exporting countries, especially Canada, Russia and the United States, have reduced wheat production, and global supply has tightened, which continues to put upward pressure on prices
.
In early November this year, the global benchmark Chicago wheat futures hit a new high, which was also the highest price since 2012
.
Euronext's milling wheat futures also hit a record high because import demand remains strong
.
FAO this month lowered its forecast for global cereal production in 2021 to 2.
793 billion tons, which is lower than the 2.
79 billion tons expected a month ago.
This reflects the downward adjustment of wheat production estimates in Iran, Turkey and the United States, which offset the impact of the increase in coarse grain production
.

 

　　In the first week of November, wheat prices pulled back from multi-year highs, but the tone of the bull market remained unchanged

 

　　The global wheat market rose further in early November.
Among them, CBOT wheat prices hit the highest level since January 2013, MGE spring wheat prices hit the highest level since June 2011, and Euronext Paris wheat prices hit the highest level in 13 and a half years
.
Global wheat demand is strong, severe weather has reduced wheat production in major exporting countries this year, and soaring fertilizer prices have threatened the prospects for planting next year and boosted wheat growth
.
In Australia, wheat harvesting has already begun in some areas, but recent heavy rains may harm mature wheat crops
.
The U.
S.
Department of Agriculture forecasts Australian wheat production at 31.
5 million tons, close to the previous year's record of 33 million tons
.
As the market unfolded, profit-making long positions suppressed the price correction of wheat
.
The market is also paying close attention to whether high wheat prices are hurting export demand
.
However, from a technical analysis, the long-term bull market trend in wheat prices has not yet reversed
.
Considering that ocean freight rates have fallen sharply recently, and the wheat purchased by major importing countries can only meet the demand in the early winter period, it is likely that after the US Department of Agriculture releases the November supply and demand report, it is likely to attract funds to enter the market again
.

 

　　U.
S.
winter wheat crops are deteriorating

 

　　The US Department of Agriculture's weekly crop progress report shows that as of October 31, the planting of winter wheat in the United States was 87% completed, 80% last week, 88% in the same period last year, and the five-year average for the same period was 86%
.
The proportion of winter wheat with excellent ratings is 45%, which is lower than 46% a week ago.
Although higher than 43% in the same period last year, it is the fourth lowest point in the same period since records began in 1986
.
The wheat margin rate was 21%, which was the highest in history for the same period
.

 

　　The price of oats has skyrocketed, creating fierce competition for U.
S.
spring wheat planting next year

 

　　The recent sharp rise in oats will put a strong competitive pressure on spring wheat cultivation in the spring of next year, and competition for arable land will be extremely fierce
.
At the end of October, the price of oat futures closed at 729.
75 US cents per bushel, up 25.
3% from the end of September, becoming the commodity with the highest increase in the month
.
So far in 2021, oats have risen as high as 102.
3%, which is also the most important commodity with the highest increase, far exceeding the 68.
1% increase of rapeseed, the runner-up
.
After entering November, the strength of oats remained unchanged, setting a record high of 779.
50 cents per cat.
At the close of November 5, the December oats of CBOT closed at about 749 cents per cat, an increase of 149.
3% over the same period last year.

.
For comparison, MGE's December spring wheat period rose approximately 81.
2% year-on-year
.

 

　　Speculative funds continue to increase their holdings in the spring wheat futures market

 

　　Considering that the spring wheat production in the United States (and Canada) this year has fallen sharply, and the supply is tight, the price needs to increase to ensure that the planting area is increased to increase the yield and ease the tight supply.
This also attracts speculative funds to flow into the spring wheat market to do more
.
The position report released by the US Commodity Futures Trading Commission showed that as of the week of November 2, the net long positions of speculative funds in the MGE spring wheat futures and options market were 17,389 contracts, an increase of 876 contracts from a week ago and a surge of 142.
6% over the same period last year.

.

 

　　U.
S.
wheat exports are accelerating, but cumulative sales are still lagging behind

 

　　The US Department of Agriculture’s weekly export sales report shows that for the week ending October 28, the US’s 2021/22 net wheat sales were 400,000 tons, an increase of 49% from last week and a 4% increase from the four-week average
.
So far this year, the total US wheat export sales have reached 13,072 million tons, a decrease of 22.
4% over the same period last year
.

 

　　The price of Black Sea wheat has risen, and Russia continues to increase its export tariffs on wheat.

 

　　Due to supply concerns and strong demand from importing countries, wheat export prices in the Black Sea region have risen sharply
.
On November 3, the FOB price of 12.
5% ​​protein wheat in Russia was US$335 per ton, an increase of US$3.
25 from the previous trading day
.
In addition, the FOB price of 11.
5% protein wheat in Ukraine was US$328 per ton, an increase of US$1.
25
.

 

　　The world's major importing country-Saudi Arabia bought 1.
27 million tons of flour wheat through a bidding meeting, and the purchase volume exceeded market expectations
.
Egypt, the world's largest wheat importer, also tendered to buy 180,000 tons of wheat from Russia
.

 

　　The Ukrainian government limits wheat exports in the 2021/22 season (July to June of the following year) at 25.
3 million tons, which may also lead to tight supply
.
The US Commodity Meteorological Group said on November 2 that rains were scarce in Ukraine’s agricultural production areas this week, and a considerable part of the wheat fields were dry, which may affect the yield potential of wheat
.

 

　　In Russia, the spring wheat harvest may fail, and export tariffs will increase, which will also cause further tightening of supplies
.
The Russian Ministry of Agriculture has raised the export tariff on wheat from November 10-16 by US$2.
9 to US$69.
90 per ton
.
.

 

　　In Australia, wheat harvesting has already begun in some areas, but recent heavy rains may harm mature wheat crops
.
The U.
S.
Department of Agriculture forecasts Australian wheat production at 31.
5 million tons, close to the previous year's record of 33 million tons
.

 

　　The U.
S.
Department of Agriculture may increase U.
S.
corn production in the supply and demand report

 

　　The US Department of Agriculture may lower global wheat ending stocks in the November supply and demand report issued next week
.
The global wheat ending stocks in 2021/22 are expected to be 276.
5 million tons, which is lower than the 277.
2 million tons predicted in October and 288.
3 million tons in the previous year
.
Among them, China's wheat stocks are expected to be 141 million tons, and India's stocks are expected to be 28 million tons
.