Please disable Ad Blocker before you can visit the website !!!

Wheat Long

by SignalFactory   ·  March 2, 2022 | 09:21:04 UTC  

Wheat Long

by SignalFactory   ·  March 2, 2022 | 09:21:04 UTC  

Major global grain producers and exporters Russia and Ukraine remain in a full-scale war with no end in sight and that’s keeping the grain futures markets unnerved. Ukraine’s exports have stopped and there are ideas Russian shipments out of the Black Sea will be disrupted. Global end-users may need to soon find alternative wheat supplies. The war will remain on the front-burner for the grain markets for the near term.

THE loss of product from one of the world’s largest wheat exporters will be impossible to replace and will likely push wheat prices to all-time highs according to grain market analysts.

“It’s significant no matter which way you look at it, both in the here and now and looking further ahead to the northern hemisphere new crop,” said AgScientia principal Lloyd George.

“We’ve previously seen wheat futures push through the US$10 a bushel mark in 2007-08 but that was more in reaction to technical issues and market shorts than fundamental supply and demand.”

“This time, futures are already at those levels and there is scope for them to push higher and cash prices to follow suit.”

Mr. George said the current price rally may push the ceiling as to what customers were willing and able to pay for wheat.

“There are limits as to how high values will go, but there is still room for further rises based on what we’ve seen in the past.”

“You’ve got a lot of the major buyers of Ukrainian wheat and they are very price-conscious, there will be limits as to how high we can go, but we’ve previously seen record highs translating into around $A450 a tonne when we’ve seen export bans in Russia and you would think we will challenge those levels hard.”

Mr. George said in the short term the world market had to adjust without Ukrainian supplies of old crops due to port closures.

“The Ukrainian ports are closed and grain is not getting out.

“Ukraine accounts for around 11 percent of world wheat exports, so it is a big chunk that you cannot just whistle up out of nowhere and that is not even taking into account any potential disruptions out of Russian ports in the Black Sea region.”

Mr. George said further out there were likely to be downgraded in new crop production in Ukraine.

“At the very least there is going to be some disruption now, with the crop coming out of dormancy, with people not attending to crops due to the conflict.”

“At the other end of the scale if things continue to go badly and the crop cannot be attended to or even harvested we may see really big losses, no one knows exactly how it will play out but some sort of disruption is already happening, it’s just to what extent it ends up limiting total production.”

Mr. George said the world market could manage shortfalls to some extent by rationing demand but said nothing could prepare for a sudden shortage of this size.

“We can ration demand and that could give you 4pc at the most but you’re taking out 11pc.

“The price signals are great for the spring wheat crop, but the majority of the northern hemisphere is winter plant, so while people talk up increased plantings it is unlikely to produce the volume of grain you would need to cover the shorts.”

Rabobank agricultural analyst Dennis Voznesenski agreed the loss of Black Sea grain would be impossible to cover.

“The Black Sea region accounts for 34 percent of global wheat exports, and a full-scale conflict between Russia and Ukraine will see exports out of the region grind to a halt, at least in the short term, due to blockages to shipping and the high cost or lack of availability of insurance for vessels,” Mr. Voznesenski said.

He said down the track sanctions on Russia, even if not directly from the North African and Middle Eastern nations that form a large customer block for Russian wheat, would also be supportive of wheat prices.

Mr. George said he did not expect Australian cash prices to directly see the full extent of price gains in the short term due to capacity issues.

“The shipping stem in the near term is booked out, so there is not that port capacity to take advantage of immediate demand caused by cancellations of Black Sea product.”

“There has been a rise in old crop prices, best seen on the Clear Grain Exchange, since the conflict began but the real gains will likely be seen after April when there is currently some excess capacity exporters could book to sell higher-value grain.”

“Previous highs in the Australian cash market have all been a result of massive drought premiums, with a positive basis of up to $180/t, so this year will be different as it is caused by global factors.

“Looking forward, it is hard to see even with the most optimistic outlook regarding the end of the conflict that we are not going to have sufficient disruption for the world market to challenge those figures.”

He said if the prices continued to rise there would be a systemic cutting of wheat from diets, particularly in price-conscious nations.

“We’ll see people eating more rice, in Africa they will eat more sorghum and cassava as people search for more economic alternatives, there is a roof as to how much buyers can afford to pay for wheat.”

Mr. Voznesenski said world markets had skyrocketed since Russia’s aggression towards Ukraine started spooking markets earlier in the month.

“Global wheat prices have already risen 21pc since February 1 this year and – in the very short term – prices could rise another five to 10pc.”

Similar to Mr. George he forecast much higher price rises should the Black Sea new crop be impacted.

“If the conflict continues into July when the Black Sea harvest starts, and sanctions on Russia are implemented, global prices could rise another 61pc from current levels.”

He said this would equate Kwinana, WA APW-grade wheat rising from the current cash quote of $367/t up as high as $425/t in the near term, with markedly higher price rises possible should the conflict drag on.

The capacity constraints at port meant Mr. Voznesenski felt Aussie growers would not get the full benefit of the price gains.

“For Australian wheat prices to more closely follow higher global prices, Australia would need to increase our export capacity.”

Wheat Long (Buy)
Enter at: 1052.99
T.P_1: 1067.91
T.P_2: 1097.54
T.P_3: 1133.58
S.L: 999.69

All information on this website is of a general nature. The information is not adapted to conditions that are specific to your person or entity. The information provided can not be considered as personal, professional or legal advice or investment advice to the user. This website and all information is intended for educational purposes only and does not give financial advice. Signal Factory is not a service to provide legal and financial advice; any information provided here is only the personal opinion of the author (not advice or financial advice in any sense, and in the sense of any act, ordinance or law of any country) and must not be used for financial activities. Signal Factory does not offer, operate or provide financial, brokerage, commercial or investment services and is not a financial advisor. Rather, Signal Factory is an educational site and a platform for exchanging Forex information. Whenever information is disclosed, whether express or implied, about profit or revenue, it is not a guarantee. No method or trading system ensures that it will generate a profit, so always remember that trade can lead to a loss. Trading responsibility, whether resulting in profits or losses, is yours and you must agree not to hold Signal Factory or other information providers that are responsible in any way whatsoever. The use of the system means that the user accepts Disclaimer and Terms of Use. Signal Factory is not represented as a registered investment consultant or brokerage dealer nor offers to buy or sell any of the financial instruments mentioned in the service offered. While Signal Factory believes that the content provided is accurate, there are no explicit or implied warranties of accuracy. The information provided is believed to be reliable; Signal Factory does not guarantee the accuracy or completeness of the information provided. Third parties refer to Signal Factory to provide technology and information if a third party fails, and then there is a risk that the information may be delayed or not delivered at all. All information and comments contained on this website, including but not limited to, opinions, analyzes, news, prices, research, and general, do not constitute investment advice or an invitation to buy or sell any type of instrument. Signal Factory assumes no responsibility for any loss or damage that may result, directly or indirectly, from the use or dependence on such information. All information contained on this web site is a personal opinion or belief of the author. None of these data is a recommendation or financial advice in any sense, also within the meaning of any commercial act or law. Writers, publishers and affiliates of Signal Factory are not responsible for your trading in any way. The information and opinions contained in the site are provided for information only and for educational reasons, should never be considered as direct or indirect advice to open a trading account and / or invest money in Forex trading with any Forex company . Signal Factory assumes no responsibility for any decisions taken by the user to create a merchant account with any of the brokers listed on this website. Anyone who decides to set up a merchant account or use the services, free of charge or paid, to any of the Forex companies mentioned on this website, bears full responsibility for their actions. Any institution that offers a service and is listed on this website, including forex brokers, financial companies and other institutions, is present only for informational purposes. All ratings, ratings, banners, reviews, or other information found for any of the above-mentioned institutions are provided in a strictly objective manner and according to the best possible reflection of the materials on the official website of the company. Forex trading is potentially high risk and may not be suitable for all investors. The high level of leverage can work both for and against merchants. Before each Forex investment, you should carefully consider your goals, past experience and risk level. The opinions and data contained on this site should not be considered as suggestions or advice for the sale or purchase of currency or other instruments. Past results do not show or guarantee future results. Neither Signal Factory nor its affiliates ensure the accuracy of the content provided on this Site. You explicitly agree that viewing, visiting or using this website is at your own risk.

Signal Factory is now on Telegram

make sure to join our Telegram channel now and you will not miss any update