A (BULLISH) WHEAT STORY IS DEVELOPING…!

Sébastien
05 Aug 2021

Last season was all about low corn stocks, taking up the entire grain complex. This season, a very unexpected story is adding fuel to an already buoyant world situation. Yet again, it is all about weather…!

As harvest is now roughly 50% complete within Europe, we are starting to get better indications on what the production could look like. It started with excellent quality and yield reports, particularly in Romania. However as operations are moving north, most farmers are reporting surprisingly mixed yields and, very often, specific weight issues (below 76 kg/hl), particularly in Germany and France. We too can fear that a similar situation could occur in the UK, as weather conditions have been very similar on both sides of the Channel. Furthermore, ongoing wet conditions are leading markets to price a possible lack of available milling grades. Operators are clearly in a ‘wait and see’ position. More will be known within the next 2 weeks.

Adding to the EU & UK quality risks, US & Canadian spring high quality wheat is about to face one of the worst seasons in history, with yields potentially down 30 to 40%. In Argentina, the July drilled crop is now suffering, like last year, from ongoing extremely dry conditions. Last year the impact was massive, and the production level had to be lowered by 25%. Still too soon to tell…

Finally Russia, this week, surprisingly reduced their wheat production area by 1Mha (4Mt equivalent). With disappointing yields in the Central region and possibly in Siberia too, local analysts have massively downgraded their production forecast to 76Mt (USDA is still at 85Mt!).

Markets are stressed. Prices are buoyant. In this context of great uncertainty on the supply and quality side, being part of the ODA community is a great competitive advantage. In the coming weeks, we will continue to assess the situation in a timely fashion thanks to our farmer network. So, please continue to send us your harvest results in a timely manner! The better we are informed, the better you will be able to anticipate these very large price moves.

Sébastien Mallet
ODA UK