Wheat Market Outlook – November 25, 2024

International Grains Council, November Grain Market Report

Source: Mercantile, based on USDA data

The International Grains Council (IGC) tightened its global outlook for grains. Global grain production was lower, largely from smaller wheat and barley crops. Global consumption was higher.
For wheat, the IGC decreased wheat production by 1.5 million mt to 796 million mt. This is now essentially even with last year. Production was seen declining in the EU (down 1.5 million mt to 120.3 million mt), while production in Kazakhstan was raised 1.0 million mt to 18 million mt.
The 1.5 million mt decline in production was slightly offset by 200k mt larger beginning stocks.
Total supply was 1.3 million mt lower at 1,068 million mt, down 1 per cent from last year.
Global wheat use was seen 1.1 million mt higher as more feed use offset smaller food use.
Global ending stocks were reduced by 2.4 million mt to 263.4 million mt. down 3 per cent year over year.

Global Wheat Production and Trade

There is a lot of competition in the wheat markets as wheat is produced around the world. Below is a brief synopsis on last week’s market events in the major wheat origins.

Futures

2025 contract Chicago winter wheat closed at $564-6, down 4-6 cents on Friday, up 10-6 cents on the week.
2025 contract Kansas winter wheat closed at $565-4, up down 1-6 cents on Friday, up 13-2 cents on the week.
2025 Minneapolis hard red spring wheat closed at $601-4, down 0-6 cents on Friday, up 9-6 cents on the week.
U.S. wheat futures are currently trading 4-12 cents lower at the time of writing.

Canadian Wheat

Minneapolis Spring Wheat futures recovered from the week previous (when March contracts tested the August lows) and traded sideways for the remainder of the week. Without a spark to tell the market otherwise, spring wheat looks to be largely confined for the $5.85-$6.33 range for now.
In its November update, AAFC raised Canadian non-durum wheat exports by 200k mt to 20.8 million mt. This now reflects a 4.5 per cent (~1 million mt) decrease from last year and is closer to our export estimate of 21 million mt. Ending stocks were respectively reduced by 200k mt to 3.8 million mt, down 10 per cent (410k mt) from last year. The final StatsCanada production report is scheduled to be released on Dec 5, 2024.

Source: Mercantile, based on STC, AAFC, and Mercantile data

Canadian exports in week 15 were below the average seasonal pace to date at 322.2k mt. YTD exports are now 5.8 million mt, which is exactly inline with last year having gained another point over the week. Deliveries, terminal receipts and exports are all in-line with last year, while domestic use is currently 17 per cent lower. AAFC believes that domestic use will be unchanged from last year.

Source: Mercantile, based on CGC data

Canadian Durum

AAFC increased its estimate for durum exports by 100k mt to 4.9 million mt. This is a 38 per cent increase from last year. AAFC decreased ending stocks respectively to 800k mt which is still double last year’s volume. Our export estimate is 4.5 million mt, which could be low, but when splitting out the exports by destination, it is difficult to argue for a larger number so early in the season (see ‘Canadian Exports by Destination’ chart next page).

Source: Mercantile, based on STC, AAFC, and Mercantile data

Algeria bought 350-400k mt of mostly Canadian durum last week for an average price of U.S. $354/mt. We calculate that this is worth about CA$9.50/bu at the elevator in Saskatchewan. The shipments are to be made in Jan-Feb 2025. Algeria’s previous tender was at U.S.$334/mt, so U.S.$20/mt less.
Canadian durum exports in week 15 were 171.9k mt for a season total of 1.2 million mt, up 45 per cent from last year. Deliveries were also strong at 162.2k mt. Canadian durum is benefiting from smaller exports from Turkey and Russia as well as the resumption of normal traffic volumes through the Panama Canal. Two thirds of the week 15 exports were from Vancouver and likely bound for the EU or North Africa via the Panama Canal.

Source: Mercantile, based on CGC data

Global Durum

During Jul-Nov, the EU imported just 176k mt of durum from Turkey compared to 561k mt during the same time last year. Durum exports from Turkey are down 75 per cent from last year. A ban on Russian imports means that essentially no Russian durum has been imported into the EU compared to the 348k mt imported in Jul-Nov last year. The EU Commission expects that durum imports will be 20 per cent higher than last year compared to the current pace that is 70 per cent behind last year. So, we expect the EU in increase its pace of imports, and Canada is well positioned to fill some of this demand.
Morocco’s wheat crop was the smallest in seven years. Officials say that total wheat production was down 41 per cent from last year at 2.5 million mt. Of this, 700k mt is said to be durum. The USDA Foreign Agricultural Services (FAS) has wheat consumption in Morocco rising with population growth to 10.1 million mt. Essentially all the wheat consumed in Morocco is for human food. Morocco’s wheat imports are expected to rise by 20 per cent from last year to a record, 7.5 million mt this year. The EU is usually Morocco’s main source of wheat, but the small and poor-quality crop in France has forced Morocco to source more of its supplies from the Black Sea. Canada seems to be benefiting as well, Morocco has imported 143k mt of Canadian durum in Aug-Sep. This is 211 per cent of last year’s YTD volume. It is too early to know for sure, but we currently estimate that Morocco could import about 900k mt of Canadian durum this year (up 17 per cent year-over-year).

Source: Mercantile, based on STC and Mercantile data

Global durum demand remains strong. With the recent large purchase by Algeria, we would target sales up to 55 per cent sold at 10.00/bu depending on your location.

U.S. Wheat

U.S. wheat futures were higher on the week. Most of the support was from technical trading, but the escalations in the Russia/Ukraine war added some support.
Eighty-four percent of the U.S. winter wheat crop has emerged, up 8 points from last week. Condition ratings improved by another 5 points to 49 per cent Gd/ Ex. Rain has eliminated most of the drought in the Central Plains except for some lingering dryness in the Northern States.

U.S. export sales were at the high end of expectations at 550k mt. Total commitments are now 14.8 million mt, up 23 per cent from last year compared to the USDA’s 17 per cent increase.
U.S. Hard Red Spring (HRS) for Dec. 2024 is valued at $288.00mt FOB Pacific Northwest (PNW) (up $7.00/mt from last week), FOB Gulf Hard Red Winter (HRW) 12/13.5 pro is valued at $263.00/mt (up $7.00/mt from last week); Gulf HRW 11/12.5 pro is at $256.00/mt (up $8.00/mt from last week).

Australian Wheat

Rain in Australia’s southern Queensland and NSW slowed harvest progress, but harvest in the south is running at full force. Harvest results in Western Australia are above expectations. Yield results suggest that the WA wheat crop will be the third largest on record.
FOB values in Australia: Dec. ’24 Australian Premium White Wheat (APW), WA was valued at $265.00/mt (up $5.00/mt from last week).

Argentine Wheat

Wheat harvest in Argentina is 29 per cent complete. The average yield is 1.93t/ha. Buenos Aires Grain Exchange (BAGE) let its estimate at 18.6 million mt.
Argentina’s wheat continues to grow in competitiveness on the global market. We have FOB Argentine 12 pro wheat upriver for Dec. 2024 is $219/mt, up $7.00/mt from last week. Despite the increase in value, this is now the third week in a row that Argentina’s wheat has been the cheapest in the world on a FOB basis. The spread between it and Black Sea wheat (the second cheapest wheat) has grown to $8.00/mt.

EU Wheat

International futures market of France (MATIF) wheat futures finished the week at a five-week high.
French Farmers seeded another 12 per cent of the wheat crop, which is now 90 per cent complete. This is now in-line with the average pace due to the record progress French farmers made over the past three weeks. The initial crop condition rating is strong at 88 per cent, but there is little correlation between these initial crop ratings and the final yield.
EU FOB prices: 2024 French 11 pro wheat closed at $238.00/mt (up $11.00/mt from last week); Dec. 2024 German 12.5 pro wheat closed at $251.00 (up $12.00/mt from last week); Dec. 2024 Baltic 12.5 pro wheat closed at $250.00/mt (up $10.00/mt from last week).

Black Sea Wheat

Institute for Agricultural Market Studies (IKAR) is estimating that the Russian wheat area will fall by 2 per cent to 29.6 million hectares in the upcoming season.
According to Routers, “heavy losses” and nearly zero profitability has Russian farmers switching away from wheat into other, more profitable crops, like soybeans and sunflowers.
We have Russian FOB values for 12.5 per cent protein wheat for Dec. 2024 at $227.00/mt (up $1.00/mt from last week).

Significant Purchases/Trades

- Algeria bought 350-400k mt of durum wheat for Jan-Feb 2025 shipment of mostly Canadian origin- at an average price of $354/mt.
- Algeria returns this week for soft milling wheat.
- U.S. export sales were 550k mt. Total commitments are now 14.8 million mt, up 23 per cent from last year.

Significant Events Over the Past Week

The Commitment of Traders report showed managed money in Chicago wheat add 6,239 contracts to the next short to 51,546 contracts. In Kansas, the net short position grew by 4,227 contracts to 29,375 contracts. In Minneapolis Spring Wheat, traders added another 7,578 contracts to the now, near-record, short of 30,002 contracts.
The U.S. dollar rose to its strongest level since November 2022 at 106.93.
Russian officials say that the country will export 55-60 million mt of grain this year compared to 72 million mt last year. The USDA expects that 48 million mt of this will be wheat, compared to 55.5 million mt last year.

Mercantile’s Weekly Outlook

According to Mercantile, MATIF and U.S. futures found some support at the contract lows, but U.S. wheat is expensive compared to other origins. Black Sea wheat remains comparatively cheap, and Argentina is also working to take more demand, says Mercantile. Meanwhile, end users are not well covered, but they remain reluctant to buy as the very strong U.S. dollar and weak currencies of importing nations are not helping demand, according to Mercantile. Mercantile is 25 per cent sold at $8.00 and would hold additional sales for now.