Afternoon wheat commentary: GASC in for wheat following a defensive day
After a quiet start to the night, both Chicago and KC wheat found some selling shortly after the European markets opened and futures gradually weakened into the morning break. That was an omen for things to come as once the markets opened for the day session trade immediately took out its overnight lows, which sparked additional selling pressure. It wasn't until futures had fallen to double digits lower before the break stabilized, but by then the markets had dug themselves too big of a hole to think about trying to climb out of. Chicago and KC did finish a nickel off its lows, but also finished more than seven and five cents lower, respectively. Mpls wheat did not partake in the overnight sell-off but did so during the day. Spring wheat futures sold off sharply early then hovered around their session's lows all day before settling six cents lower. It wasn't only futures that saw action today as the KC/Chicago spread made a minor run towards its August highs before finishing a couple cents firmer. Taking out and settling above those highs would be a big deal, but keep in mind, it would probably have to take futures to continue to break down to accomplish that.
Several tenders are popping up globally, including this afternoon with the GASC. The US will partake in a few of them, but none are geared solely towards the US. Following the Saudi tender over the weekend, there is South Korea, Turkey, Pakistan, Jordan and Japan that will all wrap up tenders this week. Did not help futures today, but World prices have risen considerably over the past several weeks, so much so that SovEcon analysts specifically pointed out that if prices continue to rise at the trajectory they are on, they feel Russia will start to lose their competitive edge to neighboring countries. This morning we said the best way to see how accurate that statement is was by having a GASC tender, and this afternoon we got one. Russia is anticipating another big month of exports, so expect them to still dominate the offers, for at least one more tender. But just seeing other countries on the list of offers would probably be enough to start slowing down the accelerating rise of prices.
After Tuesday's close the GASC announced they were in for wheat, this time for shipment between Nov 10 thru Nov 20. The last time the GASC was in was on Sept 3, and they ended up buying one Russian cargo at $240.50/mt C&F, which was more than twelve dollars higher than what they paid in their prior tender. FOB offers started at $225.00 for a cargo of Russian, and that too was roughly twelve dollars higher than the low FOB in the previous tender. The next lowest offer was also a Russian cargo at $227.00, followed by an offer at $227.84, so it was no wonder the GASC bought only one cargo (55 TMT). Could see another big spike in offers as World values have firmed significantly over the past few weeks. SovEcon was worried that the sharp rise in price may have made neighboring country's more competitive with Russia. We will see in the morning but expect offers as much as ten dollars higher than what we saw Sept 3.
HRW basis bids saw no changes on Tuesday. Bids for 11-pro remained +108/118, the 11 ½-pro stayed +108/+118, the 12-pro remained +119/+129, the 12 ½-pro stayed +119/129 and the 13-pro was unchanged at +130/140. HRW wheat export bids also saw little change on Tuesday. In Sept, ORD stayed +137, 11-pro remained +147 and the 12-pro stayed +159. For O/N/D, ORD stayed +142, the 11-pro remained +157 and 12-pro stayed. SRW wheat track bids down to the Gulf unraveled on Tuesday. Sept moved to 35/50 (down 5/up 5), Oct moved to 45/47 (down 16/down 8) and Nov fell to 55/63 (down 11/down 7). HRW wheat track bids to the Gulf saw no changes. Sept stayed 160/170, Oct stayed 168/178 and Nov remained 168/178.
The French farms ministry reduced its soft wheat harvest estimate by 200 TMT down to 29.5 MMT. Last year's crop was 39.6 MMT. This season's soft wheat planted area is seen around 4.28 mln hectares off from the 4.35 mln ha last month, and below the 5.0 mln ha last season. However, the yield outlook was increased slightly to 6.89 mt/ha from 6.83/mt last month but lagging the 7.91 mt/ha in 2019.
Russian ag consultancy suggested September Russian grain exports could set a new record volume as thus far 1.9 MMT of grain has been shipped, and the group is projecting around 5.85 MMT could be sent abroad in September, surpassing the 5.77 MMT in August.
Export business this week:
*** South Korea's SPC is in for 38 TMT of Canadian or US origin wheat.
*** The lowest offer in Turkey's 500 TMT wheat tender was $240.49/mt for around 60 TMT. No purchase has been finalized yet, with results expected later today.
*** The lowest offer in Pakistan's opt origin wheat tender was said to be $274/mt. Other offers ranged between $274.36/mt up to $277/mt.
*** Russia's embassy in North Korea said 50 TMT of Russian wheat was delivered to the communist regime as humanitarian aid.
*** Over the weekend Saudi Arabia's (SAGO) purchased 745 TMT of wheat in their latest purchase tender. The avg price for 685 TMT of the 12.5% pro wheat was $251.13/mt CIF, and 60 TMT of the 11.5% pro wheat was priced at $245.37/mt CIF.
*** Sept 16 Jordan back in for 120 TMT of opt origin wheat.
*** Sept 17 Japan is back in for their usual weekly tender. They are seeking 104,870 mt of Aussie, Canadian and US origin wheat. The total includes 22,685 mt of Aussie white, 25,420 mt of Canadian red, 27,030 mt of US DNS, 16,405 mt of US white, and 13,330 mt of US HRW.
*** Sept 30 Ethiopia is seeking 80 TMT of milling wheat.
*** Oct 13 Ethiopia is back in for 400 TMT of opt origin wheat.