Despite Chicago Board of Trade (CBoT) wheat futures closing up, 60 US cents per bushel (USc/bu) on Wednesday night of last week, they then fell 30 USc/bu last Friday.
The midweek surge higher across international wheat futures was on news Russia bombed and damaged Ukrainian port infrastructure used for grain exports.
To give this rally some context, it was the largest daily move higher in CBoT wheat since the beginning of the Ukraine war.
Let's try and interpret price moves across the entire week.
On Monday last week Russia confirmed the Ukraine grain corridor deal was dead, yet this saw little response in international wheat futures.
The market was largely expecting the news and ultimately saw it as having little impact.
Shipments from Ukraine had been disrupted for months by Russia, Ukrainian grain had found an alternative path out via Europe, and the record pace of Russian grain exports was expected to continue setting global prices.
Then the bombs hit, and photos of damaged port assets hit the wires and social platforms.
It saw fund managers that have been holding large net short positions, betting the market will go lower, to react and quickly buy back those positions pushing wheat futures higher.
It also saw a short covering response by physical wheat buyers, meaning they bought grain.
137,000 tonnes of grain traded on Clear Grain Exchange (CGX) last Thursday as Australian buyers scrambled to secure grain pushing their bids up to prices growers were targeting to sell.
In many instances, growers sold grain through CGX at "above" their offer price as buyers were vigorously out-bidding each other for grain before the CGX market opened.
The lift in international wheat futures provided opportunity for Australian buyers to increase their bids and many Australian growers to sell at prices they had been targeting.
We waited with abated breath to see if the price action would continue higher Thursday night, however CBoT futures ended flat and on Friday night they fell 30 USc/bu.
At time of writing, it appears to me that the market is not expecting the bombings to change the outlook of global supply and demand significantly.
Global wheat stocks-to-use excluding China, are projected to be the tightest this year since 2008 at 20.13 per cent and so this is underpinning a volatile price environment.
However, for now, international wheat futures appear stubbornly resilient in their current wide sideways trading range.
We can expect daily news wires on Black Sea developments and weather forecasts to continue moving prices up and down in the medium-term.
More information: Contact Clear Grain Exchange on 1800 000 410 or support@cgx.com.au
