Wheat Market Turmoil

By Laura Smith

15^th July, 2024

It had been a month of misery for wheat futures markets as the territory that April and May had spent gaining, was given up quickly by July. The ‘shrinking Russian crop’ story was overshadowed by the ‘largest US wheat crop in five years’ story, emphasised by the better-than-expected harvest reports out of the Hard Red Winter wheat growing regions.

Last week’s USDA confirmed these reports, adding further turmoil to grain markets. Global wheat outlook for 24/25 was bearish with larger supplies, domestic use, exports and ending stocks. All wheat production was raised by 134 million bushels, the main drivers are increased production in the US, Canada, and Pakistan.

Corn is forecast to increase by 240 million bushels, however corn ending stocks were dropped to 2,097 billion bushels with a stock to use ratio of 14.1 percent. Global soybean production was slightly lowered to 4, 435 billion bushels with a 20-million-bushel drop is ending stocks, with a stock to use ratio holding around 10.0 percent. Canadian and European markets aren’t proving much certainty in prices, with the US reporting a 0.3 million bushels increase in production due to increases in rapeseed, peanuts, and cottonseed, counteracting the reduction in soybean and sunflower production. 

The Aussie dollar is harder to pick than a broken nose, but with US Fed CPI data reported lower in line with targets, it could see the US drop interest rates later this year.  Meanwhile the Reserve Bank of Australia is warning of interest rate rises if inflation isn’t brought back down. Upcoming inflation data will be vital in determining the future direction. If rates are hiked, this could impose further strength to the Australian Dollar relative to the US dollar over the coming months as investors look to receive a greater return on their investment. So, while the strength in the AUD remains positive for those lucky souls sunning themselves in Bali or Europe or investing, it will make the task to remain competitive on the global stage more difficult for Aussie farmers and grain exporters.