09-25-2013 02:00 PM
Argentina probably will not allow wheat export permits until the end of January due to this year's production problems, continuing the effort to keep domestic food affordable in their weak economy. This relates to Brazil's need to import wheat from other sources. This last Brazilian wheat crop was damaged by frost (as was Paraguays). They will probably continue to import from the US.
India had a good wheat crop this summer, compounding the storage issues developed over the last two years. However, they haven't been successful in exporting much because domestic and bureaucratic policies have had the acceptable export price above the world price - for grain that is generally understood to be of minimal quality due to handling and storage conditions. Meanwhile, the domestic food program has been expanded to 800 million people. This highlights the contradictions of India as it is the #2 food producing country in the world (#2 producer of wheat also) and exports and imports food. Do you know the country w/ highest food production?
Meanwhile, there are continuing expectations China will import more than 7 MMT of wheat due to lack of quality in their own crop the last few years.
09-25-2013 03:46 PM - edited 09-25-2013 03:47 PM
Locally..(SC MI)... Wheat planting will be down..... Price is not attractive enough to get guys excited..... Im starting to think that the next bull run will be a wheat lead thing?.....FWIW......p-oed
09-25-2013 04:19 PM - edited 09-25-2013 04:21 PM
A lot of domestic wheat country is only reliable for wheat. The only class that is an exception is SRW which depends more on DC beans to make sense. Those areas where corn and bean varieties are making inroads on wheat acres will probably continue the trend.
Globally dry (where irrigation isn't economic) or short season areas tend to favor wheat. That's why Russia has always depended on wheat for feed.
I think the conditions that lead to better or worse production will be the key. Sometimes the Aussies and Ukraine get good wheat crops but they are always highly variable producers. Same w/ the southern Plains, Canada (to some extent) and Russia.
The global production as a whole isn't as important as the top 5-6 exporters. Not all wheat is mobile on the international market. It's the relative dynamics added together on the import/export scene that results in real market movement. Floor traders and specs are certainly not a part of it except for brief periods of hours or days when they surge due to 'herd realization'. But there is little over all impact on market dynamics. They can be ignored until the decision to make a sale gets down to a window of days. The black swan is not economic to consider unless the cash flow or finances (risk exposure) is tight. Insurance is insurance. It is a cost and the level of insurance must be dictated by the nature of the operation.
The longer term signs I look for is the trends and conditions in the top exporters and the conditions in the likely and common importers. China is the #1 producer of wheat but isn't an important factor in global trade - unless it imports.
09-25-2013 07:32 PM
09-25-2013 09:53 PM
If you can get the 100 bu/ac you go for it. Not many places can depend on that kind of production but fall conditions are the first step.
I can and do get 100 bu SWW but I am definitely in the sweet spot for dryland. We just have to climb the hills to get it. 80 bu is a disappointment. I had 60 bu spring wheat and wasn't happy with it. I am simply spoiled.
But I'll never grow corn or soy in my life as we don't have a long or warm enough season. Milo? What's that?
09-25-2013 10:31 PM
Palouser, do you know what the world s/d picture is w/ SRW for 13/14? while US is looking relatively balanced, erring ever so slightly to the tight side.
charts and $ internals do look good for an up move.
09-25-2013 10:41 PM
I'll have to dig a bit. I don't specifically look at SRW though I recently saw that Chinese purchases earlier were supposed to result in lower inventories than the norm lately. I don't know if that was to carry through this nest year.
09-25-2013 10:43 PM
Repeating, wheat is grown so diverse geographically, risks of mass shortfall are vastly reduced. The “perfect storm” can happen, but very low odds. Analysts covering wheat look at the composite crop and scale the data. Sometime back someone thought a freeze in Brazil during their winter harmed win. Wheat, not, plus the # suggested was a fraction of a % relative to the world crop. Annually several growing regions have less than ideal conditions and annually several have great conditions. Thus if you review world wheat output over 20, 40, 80 years, largely we grow nice wheat crops with some variation.
The media has to say something and day in out we can read some component positive or negative, but much is vibrations, useless.
The “fundamental trend”, the market’s purpose, its mission, is the key if there is any key, economic based with mother nature overriding.
IE corn, back to back poor years in the largest growing region, NA, with less elastic demand vs. 10 or even 5 yrs back, brought 7-8$ corn. Now the mission is respond to price, plant more, and more grows as long as ‘mo nature cooperates. This year she has, though we are under trend. Btw imagine if we were at trend.
For wheat, that mission started 2-3 yrs back. We had a perfect storm with a few important growing regions having poor yields side by side. But a commodity is just a commodity. Look up the definition. Ag Econ 001, commodities trend towards their cost of production.
“Floor traders and specs are certainly not a part of it except for brief periods of hours or days”
The floor died a decade ago. We trade electronically.
The speculator palsy a very important role. See Samuelson, the econ text we were supposed to read in college.
He/she take on risk others can’t or won’t and if he /she performs economically useful functions - on average – they get paid. IE say next yr we grow 14.5 B corn, and ES is 3 B. At the worst time in harvest – outta storage, corn on the ground, oh my – a good spec will take on supply, he is demanding supply when the market and producers vcan’t handle it. Odds are, those very low prices incite a higher than expected use yr and those low prices discouraged bankers and producers whom start to lower planting oplans. And on average, (note, no sure thing yr in yr out) he will be paid. Selling in March and 50% in late June.
Mere buying or selling by a exporter or importer or a spec or anyone is meaningless. Zip.zip. In every crop year, through time, the market, with economics driving, discovers the unfolding truths .
Is what it is.
Re exports delays. Of course those facctors are bearish . Crops are grown to be marketed and consumed.
Argentina recheck your data, Q2 GDP was up 8.3%, growing facter tthan China. Making stuff up to make a case is
kinda self del ______. Nothing prsonal.