The Good: The wheat markets moved higher today with spring wheat breaking the persistent down trend that has been a feature of the market since the end of December. One day does not a rally make, but spring wheat is in a severely oversold position and has tried to form a bottom this week. The March contract was up 14 cents per bushel to close at US$9.28 per bushel. There is still significant distance between the current price and the 100 day moving average which sits at US$9.66 per bushel. The rally in wheat was likely due to tenders from Turkey and Algeria that were released today. Turkey is seeking 335,000 tonnes of milling wheat for shipment in from mid-February to mid March. Algeria has a tender for a nominal 50,000 tonne and will likely end up purchasing a much larger amount. Delivery for the Algerian tender is in March. This continues the recent trend of wheat prices moving lower only to be met with increased demand from the major importers.
The Bad: Canadian wheat exports in November were relatively strong with a total of 970,100 tonnes shipped during the month. This was larger than the 858,700 tonnes October. The strong movement came despite the flooding in BC and the rail outages. The increased shipments also came without strong participation of China, which received a paltry 11,000 tonnes from Canada during the month. The largest importer was Japan with 162,900 tonnes shipped during the month. More surprising was the second largest importer, Indonesia (146,600 tonnes) and Colombia (135,300 tonnes). Although both countries regularly import Canadian wheat, it appears that demand has not been totally curtailed by the high prices.
The Ugly: The narrative in the oil market seemed to be very clear a month ago. The emergence of omicron virus would slow economic activity and reduce demand. This news combined with a coordinated release of reserves by the U.S. and other oil consuming countries pushed WTI prices down close to US$62.26 per barrel in early December. With the typically slow first quarter demand, crude oil was supposed to remain the the US$60s for a few months in order to tame the inflationary impact of energy prices. The narrative did not play out and crude oil supplies continue to shrink as production remains constrained. It appears that demand for oil is strong, despite the emergence of the new variant and oil stockpiles continue to shrink. This is not good news for input prices (diesel) in the spring of 2022.