LAST week's United States Department of Agriculture report for November fired up the grain markets with US ending stocks for both corn and soybeans coming in much lower than expected.
For corn, yields were down and exports were up, with a new US export record being forecast.
Globally corn production estimates were lowered with smaller production for the US, Ukraine, the European Union and Russia.
Against lower production were increased imports for China and South Korea.
Global corn ending stock estimates fell nine million tonnes from the October estimate.
With corn prices rising, there was some support for wheat futures.
However, wheat was also supported by a 1 million tonne drop in global ending stock estimates, a 500,000 tonne drop in stocks outside of China and a 170,000t drop in US stocks.
China is playing a big part in the market this year via increased imports of corn and wheat.
It is assumed that corn imports will exceed their quota limit for current tariff levels, with an expectation that the quota will be increased.
Chinese wheat imports are likely to hit 8mt which will be their highest levels since 1995/96.
Meanwhile, with an easing of weather concerns for the 2020/21 global winter wheat crop with improved moisture conditions in the US and Black Sea, wheat futures have pulled back from their recent highs.
A price correction was probably necessary because US wheat prices had moved ahead of Russian prices.
With Russian prices holding, US wheat is now more competitive in global markets.
That will help put a base in US wheat prices and Chicago Board of Trade (CBoT) futures.
If that works, it should limit the downside in prices.
In US dollar terms, the market has fallen 39.25 US cents per bushel, or 6.2 per cent from the closing high on October 26.
In Australian dollar terms the peak price was recorded on October 21, with the market now down $29.35 (8.91oc) per tonne since then.
The peak in the futures market was the highest for a nearby contract since December 2014, and in A$ terms the peak daily closing price of $329.50 was basically the peak value seen outside of this year's COVID-19 price spike since early 2008.
In Australia, prices around the various port zones are at similar levels, with the exception of Kwinana, which is holding a $5 a tonne premium to where it would normally trade relative to eastern ports.
The market is back $25/t on the peak prices seen since late October.
Basis levels remain weak but have improved a little.
Australian wheat should be competitive into global markets at current price levels.
While prices remain above $300/t port basis, farmers are likely to be willing sellers of at least the early part of their harvest.
- More information: contact Malcolm Bartholomaeus on 0411 430 609 or firstname.lastname@example.org