Russia

SovEcon increased their view of Russian October wheat exports again. Last week they upped it from 4.6 million tonnes to 4.7. Today they upped it to 4.8. This new number is +0.2 from last year's October. It brings the July - October pace to only -0.2 from last year. USDA sees the whole year ending -7.5 from last year. There will be point in the months ahead when this Russian export story is likely to sharply change.

Last week the Russian Grain Exporters Union noted exporters will sell directly to government grain buying agencies and sovereign wealth buyers. The move would essentially create a two tiered wheat market. Essentially, a Cargill or ADM would not be able to offer a winning bid in an Egyptian wheat tender and turn around and source the grain from Russia. This gives a greater chance of various state buying tenders being wholly filled by Russian product. The negative is that until the market sees general Russian export declines, there may be a non-Russia wheat market and a Russian one.

Last week the Russian agriculture ministry told exporters not to make an export sale for wheat unless prices were $240 per tonne in October, $245 in November or $250 in December. Current prices have risen up to $240.

The Russian agriculture ministry raised the export duty on wheat yet again. Last week's $13.95 per tonne rate was raised to $19.54. Now, it has been upped again to $22.04.

SovEcon today speculated that these rising Russian export taxes may create a perverse incentive, sell and ship everything now before higher taxes ahead. If true, this could further delay the transition to a bull market. On the other hand, it could further exaggerate that bull market if/when it comes.

Rains of 1.2 - 2.4 inch fell over the recent two weeks. The next two are set for 0.8. This does not fix their drought. It does ease the concern.

Last week the Russian government lowered its prior 86 million tonne production view to 83. USDA is now at 82. SovEcon is the lowest yet, 81.5.

Other:

Two Friday's ago the 10/11 Commitment of Traders report showed Managed Money was a seller of -6,496 contracts in the Tuesday 10/1 to Tuesday 10/8 period. Prices fell -4 ¼ cents. Funds were sellers and the market accepted it. Friday's 10/18 report showed funds were buyers of 3,436 contracts. Price fell -15 ¼ cents. Funds were buyers and the market rejected it. These two weeks are not positive.

Crop Progress will be out this afternoon. The trade expects US winter wheat planting to advance from 64% complete last week to 77%. Harvest is right next to the five year average pace, 76%.

Weekly export sales on Friday were positive. The 504,112 tonne US sale was +7% vs. the five year average. Six of the past eight weeks have run above the needed pace, -13% from average through May.

Regarding the recent polling increase for the Trump/Vance campaign, the US is a moderate exporter to China. We're not sure if wheat has seen any trade war concern. We'll simply note the numbers. In the two years of prior trade war action we only shipped China 2 million and 20 million bushels of US wheat. In the two positive years of phase one deal buying that increased to 127 and 42 million. In the completed 2023/24 marketing year, June 1, 2023 - May 31, 2024, our shipment to them was 80 million.

Ukraine

Rains of 0.8 - 1.5 inch fell in Ukraine over the prior two weeks. Minimal rains are set for the next two weeks.

Last week an official with the Ukraine Agriculture Club noted Ukraine wheat export bids are moving up. Early September pricing was $180 per tonne for feed wheat and $200 for milling. Prices for both are now up to $207 - $211. The UAC suggests they may touch $220.

USDA Current Crop: Much of the US wheat story is known, old crop stocks and US 2024 production. Ending stocks were lowered by 16 million this report, now 812 million.

Outside Market Factors:

Retail Sales for September, out on October 17, showed a +0.4% increase from the prior month. That was just over the +0.3% trade expectation. The market will increase its confidence of only -0.25% interest rate cuts next month.

The rate of retail price inflation, the Consumer Price Index, fell from +2.5% year over year in August to +2.4% in September. This was just over the trade's estimate of a fall to +2.3%. Markets maintain their current view that the Federal Reserve will lower short term interest rates -0.25% at the next November 7 meeting of the Federal Open Market Committee.

Monthly non-farm payroll data on October 4 was quite positive. September job growth totaled 254,000. This was far over the 140,000 expected. It is also the best number in eight months. The prior 142,000 August estimate was raised to 159,000. The most recent 89,000 estimate for July was raised to 144,000.

Wheat has an on an off again relationship to the US dollar. Since July of 2023 the relationship has returned to normal. A higher dollar pressures wheat. A lower dollar supports. During that period it is -0.41.

Pricing:

Chart: The uptrend in wheat is now being tested. Bulls had hoped for Chicago to fill the 650 ¼ unfilled upside intraday gap from 6/14. For KC that was 654 ¾ from the 6/14 close. But in the short term some would suggest a chance to fill a minor gap open from the 9/20 close, 568 ½ for Chicago and 564 for KC…Rich Nelson

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