Commentary
US all wheat ending stocks came in at 615 million bushels versus 598 million expected (range 560-635 million) and 592 million in July. The report was bearish in my view, and December Chicago Wheat fell to its lowest level since July 13 after the report was released. Yield and production were lowered, but food usage fell by 5 million bushels and exports by 25 million, which resulted in a surprisingly larger than expected increase in ending stocks. World ending stocks were slightly below expectations. USDA puts the national average on-farm cash wheat price for 2023-24 at $7.50, unchanged from last month. It is my belief that Black Sea conditions have seemingly lost their power to significantly affect markets, as indicated by the lack of reaction to Ukraine declaring “open season” on Russian freighters. Seasonal pressure is likely to persist as spring wheat harvesting expands. In short, the Russian/Ukraine war can erupt at any time causing major volatility if Russian cargoes or ports are threatened. Those have been and continue to be supply side rallies. When those supply side concerns become long in the tooth, demand isn’t there for US origin to support the market. Today’s report confirms lack of demand from USDA with an increase in ending stocks to boot.
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