New to-be-fixed wheat breaks volume records
Domestic purchases of wheat are at record levels in both absolute and relative value. Exports of US wheat, at historical lows.
Future purchases of wheat at this time of year are becoming the rule rather than the exception. Hand in hand with the growth of production in Argentina, 2022 is consolidated as the 5th consecutive year with internal purchases of wheat for the next campaign in May, new normality that before now, had only been observed in 2011 and 2001.
Of the total purchases for the 2022/23 wheat campaign to date, more than 44% are under a price-to-be-fixed condition, a record for this time of year. In other words, of the 3.6 Mil MT already purchased between export and domestic, more than 1.3 Mil MT still do not have a firm price, consolidating a milestone both in tonnage and in relative terms.
The growing commercialization for wheat is also seen in exports, which totaled half a million tons so far in May and are close to 8.5 Mil MT for 2022/23 wheat. However, caution persists concerning production volumes. As highlighted in a recent report of the Strategic Guide for Agriculture (GEA-BCR), the commercial campaign which starts in December of this year comes with a lower planting-intention, which, in turn, could be accompanied by fewer technological applications in the face of turbulence in the input market.
As far as the current campaign is concerned, Upriver continues to recover its prominent role in the export of the final campaign. Consolidating shipment data up to April, the tonnage shipped from the ports of the greater metropolitan area of Rosario city grew by more than 12.5% so far in 2021/22.
US wheat exports are at historical lows
Caution reigns in US wheat. Ten days before the start of the 2022/23 business year, wheat exports do not exceed 20 Mil MT, this being the lowest value in at least 32 years, according to USDA data.
The cause of this must be sought in the meager conditions for the development of crops in North America. Indeed, we must go back just as far to find such poor crop conditions for US winter wheat. With only 27% of the plots in Good+Excellent condition, a wheat harvest in this condition has not been seen since 1996, discounting falls in production yields, reinforcing commercial caution.
To make matters worse, this week began with a Monday where wheat topped its maximum daily allowable rise in Chicago. Surprisingly, India announced that it was suspending cereal exports, leaving more than 1.8 Mil MT of wheat in limbo in ports, exports that were finally exceptionally authorized. In the context of the conflict in the Black Sea region, India’s wheat came to alleviate the strong grain needs of Egypt and Turkey, among other countries. The unexpectedness of this closing was what strongly underpinned prices since close to 10 Mil MT were expected from the Asian giant.
According to the SovEcon consultancy, there are no signs for now of a de-escalation of the Russian-Ukrainian crisis, although this week the first official communications between the defense ministries of both countries were seen. In this complex global supply framework, the week showed increases of 3% in Chicago and on Thursday the ton of wheat closed close to 442 USD/MT. For its part, the local market was not immune to the volatility of international markets. In Rosario city, the cereal showed increases in line with the US market, and offers of 375 USD/MT were seen to unload in June, 3% above last week. At the same time, offers for the 2022/23 business year showed increases of 5 USD/MT for the December position and 15 USD/MT for the following months, closing at 355 USD/MT and USD 370 respectively. Contrary to the rises, in Matba-Rofex wheat futures showed a slight drop of 0.7% in the week, settling on Thursday around 354 USD/MT.
Source: https://bcr.com.ar/
Photo: REUTERS/Stringer
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