Fundamentally Speaking

The wheat market remains in the doldrums with any rallies finding limited follow-through buying.

The market remains impervious to the situation in the Black Sea as Russia continues to submit very competitive offers for any export bid that arises.

We are seeing some support recently linked to increased Chinese purchases of U.S. soft red winter wheat and continued crop deterioration in the key southern hemisphere producers of Argentina and Australia.

It is interesting to note that the world wheat stocks-to-use ratio is trending lower while the global corn and soybean stocks-to-use ratios are moving higher.

This graphic shows the world, world less China, major exporters and U.S. wheat stocks-to-use ratios on the left-hand axis vs. the average U.S. farm price in dollars per bushel on the right-hand axis.

Projected 2023/24 world ending stocks were lowered by 0.5 million metric tons (mmt) to 258.1 mmt in last week's WASDE report, which by the way, is the smallest figure in eight seasons.

China accounts for 51.5% of that total, their second highest holdings of global wheat stocks ever next to last year's 51.9%.

That's no small consideration given that though the world wheat stocks-to-use ratio at 32.6% is the lowest since the 2014/15 season, subtracting Chinese use and stocks results in the world less China stocks-to-use ratio of 19.6%, the lowest since 2007/08 season when wheat futures went to all-time highs.

The U.S. stocks-to-domestic use ratio itself at 57.8% is above last year's 51.5% figure which was the lowest since the 2013/14 season and one of the reasons why U.S. wheat prices attained all-time highs last year.

Meanwhile the stocks-to-use ratio of the seven major exporting nations and regions which includes Argentina, Australia, Canada, European Union, Russia, Ukraine, and the U.S. is now pegged at 24.3%, the lowest since the 2012/13 season and prior to that the 2007/08 marketing year.

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