Jul 22 / Alef Dias

Wheat: demand providing support in a bearish trend

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Wheat: demand providing support in a bearish trend

 -Wheat prices are currently experiencing a bearish trend. Future prices in the US have Fallen to its lowets levels in four years, and the latest WASDE brought significantly higher ending stocks for the 24/25 season, both in the US and globally, contributing to a more comfortable supply scenario.

- However, even with the recent adjustments to USDA’s estimates, the global wheat stock/use ratio in 24/25 is still set to be the tightest since 13/14, so demand will likely provide some support when prices come near the lows seen in the last few days.

- The top destinations are expected to import above their 10-year average this season, and last week’s tenders showed that demand is there.



Introduction

It’s no surprise that wheat prices are in a bearish trend. Future prices in the US are near four-year lows, and the last WASDE brought a much more comfortable ending stocks both in the American and global scenario.

Additionally, the outlook for spring crops in the northern hemisphere and for southern hemisphere harvests continues pointing to good yields and production, as crop conditions are above the average in most countries.

However, even with the recent adjustments to USDA’s estimates, the global wheat stock/use ratio in 24/25 is still set to be the tightest since 13/14, so at some point demand should return. And last week brought some signs that the current price level is comfortable for buyers.
World Ending Stocks (M mt)

Source: USDA

World Ending Stocks and Stock/Use ratio (M mt)

Source: USDA

Tenders are showing that demand is back

Last week was marked by large tenders from some of the main wheat importers. Algeria's state grain agency, OAIC, is estimated to have bought between 700,000 and 750,000 tons of wheat - well above the average of 170,000 tons from tenders over the last 3 years - in an international tender last Wednesday (17).

Algeria's purchases in tenders are of optional origin, but the market believes that this wheat comes largely from the Black Sea region, including Russia, Ukraine and Bulgaria. Algeria is an important customer for wheat from the European Union, especially France, but Russian exporters have been growing strongly in the Algerian market.

Cumulative Wheat Shipments – Argelia (M mt)

Source: Argus

Egypt also went to the market. Egypt's state grain buyer purchased 770,000 tons of mainly Russian wheat in an international tender, marking its largest single purchase since 2022. The purchase comprised 50,000 mt of Bulgarian wheat and 720,000 mt of Russian wheat, according to the General Authority for Supply Commodities (GASC).
Russia Wheat Flows to Egypt (M mt)

Source: Argus

China’s record imports

The Chinese have also been very active in the market. China's wheat imports hit all-time highs in January-June, as firm demand and active purchases resulted in bulk arrivals to China's ports. Wheat imports stood at 1.19M mt in June, which marked a record high for the month of June, despite falling from 1.84M mt in May, customs data show.

China's overall imports reached an all-time high of 9.2M mt in January-June, compared with 7.9M mt over the same period in 2023 and 4.9M mt in 2022. Consequently, the USDA adjusted its figures for Chinese imports in both 23/24 (14M mt, the highest since 91/92) and 24/25 (12M mt, the 3rd largest since 96/97) seasons.

Seasonal China Wheat Imports (M mt)

Source: Refinitiv (numbers may diverge from chinese customs).

In summary

Wheat prices are currently experiencing a bearish trend. Future prices in the US have dropped to levels not seen in four years, and the latest WASDE brought significantly higher ending stocks for the 24/25 season, both in the US and globally, contributing to a more comfortable supply scenario.

However, even with the recent revisions of USDA’s estimates, the global wheat stock/use ratio in 24/25 is still set to be the tightest since 13/14, so demand will likely provide some support when prices come near the lows seen in the last few days. The top destinations are expected to import above their 10-year average this season, and last week’s tenders showed that demand is there.
Wheat Imports (M mt)


Source: USDA

Weekly Report — Grains and Oilseeds

Written by Alef Dias
alef.dias@hedgepointglobal.com
Reviewed by Laleska Moda
laleska.moda@hedgepointglobal.com
www.hedgepointglobal.com

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