At first glance, the global wheat price outlook does not give much cause for optimism. Russia and Ukraine’s flow of wheat exports is satisfactory, the US and Canada have harvested decent crops and volumes from the southern hemisphere are set to be robust, with likely above-average harvests from Argentina and Australia.

Despite all this positive news about wheat supply, RaboResearch analyst Vitor Pistoia said the 2024/25 season is likely to see a deficit of 10 million tonnes worldwide between supply and demand. “Adding the weather outlook and economic and geopolitical risk to this forecast, one can form the view that the market as ‘locked and loaded’ to the upside,” he said.

But, that said, a ‘trigger’ element is necessary to start a potential rally, Mr Pistoia said.

“So let`s unpack this complex and multi-faceted scenario.”

“On the bullish side of this tug-of-war, there is the possibility of a few potential supply shocks into early 2025.” Mr Pistoia said the autumn dry spell in eastern Europe and the Black Sea region allowed winter wheat sowing to catch up pace and sowing rates are aligned with historical figures. “However, the dry conditions came after an already hot and dry summer, so subsoil moisture is not great and crop development could be better. What if the spring weather does not favour these crops?”

Mr Pistoia said another bullish element relates to the Black Sea War and its economic repercussions.

“Ukraine’s government will implement a minimum price policy by early December – to be the ‘previous month’s export price minus 10 per cent’,” he said.

“Russia had already announced “guidelines” relating to wheat export prices, which are additional to export duties.” Mr Pistoia said as of late November, the guideline is set to be wheat being marketed at USD 250/tonne, with the export duty sittings at USD 27/tonne. “However, as at the same time, the Russian reference price is sitting below this level, at USD 223/tonne.”

The Rabobank analyst said if both these countries can accomplish their targets, “we will have 30 per cent of the world’s wheat export capacity following a floor price”. This would no doubt result in price transmission across supply chains, he said.

Mr Pistoia said there are a handful of triggers that could set the wheat market on a bull run.

“The most obvious one is the ongoing war between Russia and Ukraine,” he said. “If more rockets start to fly over the border between the two countries, and especially towards vessels, the war risk premium on wheat will return.”

A second trigger Mr Pistoia said could be bad weather in any key wheat-growing region, such as North America, the EU, India or China. “Endings stocks are lingering, and an abundance of corn is seeing this replace wheat for many feed millers around the globe.

“A third element relates to India. The Indian government is reporting current wheat stock levels at around 22 million tonnes versus a five-year average of 32 million tonnes, and prices are historically high. What if the Indian government decides to remove import duties? We would have an additional demand that is not being considered.”

Mr Pistoia said there is a lot to happen in the coming months until mild temperatures return to northern hemisphere paddocks. “Until then, the factors which could move the needle in the wheat market will be likely be related to geopolitics. And the trigger could come from another word that starts with “T” – tariffs.”

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