Weather: Some rain forecast for Russia but only around 6mm – still getting down to -10 degree c however. The Buenos Aires Grains Exchange has reported that recent high temperatures and limited rainfall are beginning to adversely affect soybean and corn crops. Symptoms of water stress, such as yellowing leaves, have been observed, potentially impacting yields.
Markets: Corn found a bid but wheat was hard work. With the USDA taking the knife to wheat demand, questions are being asked about the need to add in risk premium despite the potential production cuts to the current northern hemisphere wheat crop.
Australian Day ahead: Firm. It certainly feels like the story portrayed by the USDA and the actual trade flow are somewhat at odds. Export demand combined with extreme heat through the south is driving some urgency on the buy side and likely more of the same today.
Offshore
- Corn Prices Rebound: Corn futures experienced a rally, driven by fund buying, especially after inflation data in the Consumer Price Index (CPI) indicated higher-than-expected inflation.
- Soybean and Wheat Prices Decline: Despite the strength in corn, soybean and wheat futures closed lower. Analysts attributed this to profit-taking and trader disappointment over the lack of significant changes in the latest USDA reports. USDA Report Impact: The USDA’s recent World Agricultural Supply and Demand Estimates (WASDE) report adjusted U.S. ending stocks for the 2024/25 marketing year but left domestic output projections unchanged, leading to minimal movement in U.S. wheat futures.
- Global Wheat Import Demand Declines: Economic challenges and increased local cereal production in major importing countries, such as China, Indonesia, and Egypt, have led to a reduction in global wheat import demand. This trend is challenging demand ideas, obviously led by China, despite global stockpiles reaching nine-year lows.
- China’s Grain Import Reduction: The U.S. Department of Agriculture has significantly lowered its estimates for China’s 2024-25 corn and wheat imports by nearly 25 percent, reflecting China’s record domestic harvests and an overall economic slowdown.
- President Donald Trump announced plans to implement “reciprocal” tariffs, aiming to match the tax rates that other countries impose on U.S. goods. This policy shift is expected to significantly impact global commodity and currency markets. “It’s time to be reciprocal,” Trump told reporters earlier this week. “You’ll be hearing that word a lot. Reciprocal. If they charge us, we charge them.”
- Initiation of Peace Negotiations: President Trump announced that the United States and Russia would commence immediate negotiations to end the war in Ukraine. This decision followed a “lengthy and highly productive” phone call with Russian President Vladimir Putin. Both leaders expressed optimism about achieving a ceasefire and agreed to visit each other’s countries in the future.
- Conversations with Ukrainian Leadership: Following his discussion with Putin, President Trump spoke with Ukrainian President Volodymyr Zelenskyy. While specific details of their conversation were not fully disclosed, it was reported that Trump conveyed the U.S. position on the conflict and the forthcoming negotiations.
- Policy Stance on Ukraine’s Territorial Integrity: U.S. Defence Secretary Pete Hegseth suggested that Ukraine should abandon hopes of reclaiming all its territory from Russia and seek a negotiated peace settlement backed by international troops. He emphasised that returning to Ukraine’s pre-2014 borders was “an unrealistic objective” and that pursuing such aims would prolong the conflict and cause additional suffering.
- NATO Membership Considerations: Secretary Hegseth also stated that NATO membership for Ukraine was not a feasible outcome in the peace negotiations. He indicated that the U.S. expects European allies to take a more substantial role in providing financial and military assistance to Ukraine, while the U.S. focuses on its own security priorities and addressing challenges posed by China.
- US CPI was out yesterday: Monthly Increase: The CPI rose by 0.5pc in January, following a 0.4pc increase in December (average guess 0.3pc) Annual Inflation Rate: Over the past 12 months, the CPI increased by 3.0pc, marking the largest gain since June 2024. (average guess 2.9pc) Core CPI: Excluding volatile food and energy prices, the core CPI climbed 0.4pc in January and 3.3pc over the past year. (average guess 3.1pc)
- Federal Reserve Chair Jerome Powell emphasised the need for a cautious approach to inflation, indicating that the central bank is “not quite there yet” in achieving its 2pc inflation target. This suggests that the Fed may maintain its current interest rate levels for an extended period.
US CPI data. Source Bloomberg via Lachstock
Australia
WA bids were largely unchanged for all commodities. Canola was $850, wheat $377, and barley $343.
Over in the east of the country, there was a small uplift across the board, with canola bid at $770, up around $5–$10. Cereals were $3–$4 higher, with wheat at $348 and barley at $316.
With record-low container freight rates, there has been increased interest over the last week from southern NSW and Vic packers, providing some support to higher-protein wheat bids. Lower-grade ASW/SFW wheat continues to be well supported, with solid export demand for the lower grades competing with strong domestic demand.
Barley bids have continued to rise over the last 2–3 weeks through both the east and west of the country, buoyed by robust demand from China and Saudi Arabia, with strong domestic feed demand adding a solid baseline to overall demand.
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