Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Head of Commodity Strategy
Key points
Wheat futures in Chicago and Paris are showing signs of recovery after recently hitting four-year lows, supported by the outlook for a poor harvest in Western Europe, particularly in France, the EU's largest producer. Heavy rainfall in late 2023 disrupted winter wheat sowing, leading to poor crop establishment, increased diseases, and lower overall quality. Last month, the French agriculture ministry sharply reduced its 2024 soft wheat output estimate, now expected to be 25% below last year's, marking one of the worst harvests in 40 years. Southeastern Europe also faced extreme heat, impacting spring crops due to drought.
Supporting the recent recovery are dry weather concerns in the US and an announcement from Ukraine's agriculture ministry, limiting the country’s 2024-25 wheat exports to 16.2 million tons. US wheat exports have also surpassed last year's pace. On the demand side, Egypt, one of the world's largest wheat buyers, issued its biggest-ever wheat tender last month, nearly 20 times its usual size, following President Abdel Fattah al-Sisi’s decision, driven by food security concerns.
Each month, the US Department of Agriculture (USDA) releases its forecast for wheat carryover stocks. In August, the USDA projected world stocks at the end of the 2024/25 marketing year to reach 257 million tons, 9 million tons below the previous year and 26 million tons under the five-year average. US ending stocks were forecast at 828 million bushels, slightly above the five-year average of 758 million. The USDA’s next update is due on September 12.
Ample cheap supply of wheat from Russia, plentiful U.S. production and expectations of large harvests in Canada and Australia may counter the risk of a strong rebound in prices. However, large bets on lower wheat prices by speculators in the Chicago market has for now left the market vulnerable to a short covering.
Recent commodity articles:
3 Sept 2024: Chinese economic woes drag down crude oil and copper
2 Sept 2024: COT: Commodities see broad demand as the USD slumps to a net short
30 Aug 2024: Commodities sector eyes fourth weekly gain amid softer dollar and Fed expectations
27 Aug 2024: Month-long sugar slide pauses amid concerns of Brazil's supply
27 Aug 2024: Libya supply disruptions propel crude prices higher
26 Aug 2024: COT: Funds boost metals investment as dollar long positions halve amid weakness
23 Aug 2024: Commodities Weekly: Metal strength counterbalancing energy and grains
22 Aug 2024: Persistent supply contraints keep cocoa prices elevated
21 Aug 2024: Weak demand focus steers crude towards key support
19 Aug 2024: Resilient gold bulls drive price to fresh record above USD 2500
19 Aug 2024: COT Buyers return to crude as gold stays strong; Historic yen buying
16 Aug 2024: Commodities weekly: Gold strong as China weakness drags on other markets
9 Aug 2024: Commodities weekly: Calm returns to markets, including raw materials
8 Aug 2024: Sentiment-driven crude sell-off eases, allowing traders to focus on supply risks
7 Aug 2024: Limited short-selling interest observed during copper's recent aggressive correction
6 Aug 2024: Video: What factors are fueling the current market turmoil and gold's response
5 Aug 2024: COT: Broad commodities sell-off gains momentum; Forex traders seek JPY and CHF
5 Aug 2024: Commodities: Position reduction in focus as volatility spikes
2 Aug 2024: Widespread commodities decline in July, with gold as the notable exception
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)