Wheat - Prices weighed by expanding Argentine crop estimates
Wheat prices have eased, sliding in London below the much-watched £175/t mark, basis May-26, and in Paris below €190/t for December-25.
For wheat, the tide of the newsflow has turned negative, on geopolitical and fundamental supply-and-demand criteria.
In geopolitics, progress in efforts to bring peace between Russia and Ukraine is allowing the removal of risk premium injected to account for conflict between two of the world’s top wheat exporters.
A lack of significant Chinese buying of US wheat, after the countries’ trade rapprochement, has disappointed too, in underlining China’s poor appetite. Its imports for 2025 up to October, at 3.0Mt, dived 72% year on year.
The USDA has, since the meeting between presidents Trump and Xi which sealed the accord, confirmed just 132Kt in US wheat export sales to China.
As for the fundamentals, prospects for 2025/26 output in the top exporters, where supply levels are particularly influential on prices, have grown. The USDA’s 10.3Mt upgrade, in the Wasde report, to the forecast for combined output in the top seven exporters looks increasingly like unfinished business.
In Argentina particularly, there looks upside risk to the USDA’s 22.0Mt harvest estimate.
The USDA’s own Buenos Aires attache last week pegged the crop at 24.5Mt, adding that “most analysts’ estimations now range between 24-26Mt”.
Crops were boosted by “unusually good rainfall during [southern hemisphere] winter,”, the attache said, pegging the yield 25% above the 10-year average.
The impact on prices has been to depress Argentine export offers to $211/t, in turn weighing on values in competitors too. In the EU, for instance, wheat offers in Rouen, France have retreated to $225/t, close to 18-month lows.
Argentine wheat is even pricing favourably relative to corn, narrowing its discount to $1-4/t in-country, spot basis. For December, it is reported to hold a $2/t discount to US Gulf corn. It is worth noting that wheat does not tend to sustain a discount to corn for long!
Still, more supportively for prices, there are signs of weak values tempting buyers. Saudi Arabia’s 300Kt purchase on Monday was the latest in a series of recent purchases by high-profile importers, including Algeria.
The USDA’s Anakara attache forecast that Turkey’s “pace of imports will accelerate in the second half of the marketing year as stocks of domestic wheat start to contract”, and there is even hope for a recovery in China’s purchases given the extent to which imports are pricing below domestic values.
The potential for closing by funds of some of their substantial short positions, with the end of 2025 looming, should also be borne in mind, as should the potential for injection of risk premium as winter brings cold risk to crops planted for 2026.
The geopolitical narrative could of course turn more supportive as well.
Still, given current fundamentals, rallies look like being short-lived, with markets expected to trade sideways into the end of the year.
