SASKATOON — Egypt has set the tone for the 2024-25 wheat market.
The world’s largest importer has struck a deal to buy 3.12 million tonnes of Black Sea wheat from November to April, according to Reuters.
Egypt’s General Authority for Supply Commodities (GASC) will be importing 510,000 tonnes per month from the region in one of the biggest direct wheat deals ever signed.
“This is a wake-up call to some of the other major buyers out there that if they were waiting for prices to drop, they will not be dropping,” said MarketsFarm analyst Bruce Burnett.
GASC attempted to complete a similar deal in August when it tendered for 3.8 million tonnes of wheat, but it was only able to secure 280,000 tonnes from Ukraine and Bulgaria at that time.
Burnett said the latest tender should help establish a floor price for wheat and sends a strong message to buyers in other markets such as North Africa and the Middle East.
“This is a signal that prices probably are not going to be dropping in that Black Sea/European theatre,” he said.
Buyers are also hearing reports that 32 per cent of Argentina’s crop is in poor condition, Australia’s wheat is suffering from frost damage and regional dryness and the European Union’s crop keeps getting smaller.
And then there are the reports that winter wheat seeding in Russia and Ukraine is delayed due to dry conditions.
That is why spring wheat futures rallied for the week ending Oct. 4, despite the discovery of way more non-durum wheat in Canada.
Agriculture Canada made a massive adjustment to last year’s wheat supplies, which means there’s way more product to sell this year.
Supply of non-durum wheat for the 2023-24 crop year was increased by a staggering 2.8 million tonnes due to a two million tonne bump in carry-in and a 950,000-tonne hike in production.
Exports were increased by 373,000 tonnes, but 2023-24 ending stocks are now pegged at four million tonnes, which is double what they were in the August report.
“The size of the changes is startling,” Mercantile Consulting Venture said in a recent Wheat Market Outlook and Prices report prepared for the Saskatchewan Wheat Development Commission.
“Backward changes to the previous crop distort the signals given to farmers when making cropping and marketing decisions.”
The changes to last year’s crop forced Agriculture Canada to increase 2024-25 supply by 1.9 million tonnes.
Ending stocks jumped to four million tonnes, double the amount of the August report. The stocks-to-use ratio is now 14 per cent, up from seven per cent in August.
Oddly, wheat prices climbed in the wake of the Sept. 25 report that added two million tonnes to the 2024-25 carryout.
The price for No. 1 CWRS wheat was $282.44 per tonne as of Oct. 2, up from $263.02 on Sept. 25, according to Saskatchewan Agriculture’s website.
MarketsFarm analyst Bruce Burnett understands the market’s tepid response to the huge adjustment to 2024-25 carry-in and carry-out numbers.
It’s because the market never bought into the previous two million tonne carryout estimate, believing it was far too low.
Even the revised four million tonne carryout number is historically tight.
“The carryout is not going to be burdensome in any way, shape or form,” said Burnett.
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