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Argentine Wheat Harvest: Prices Retreat Amidst Global Volatility

A report published today by the Rosario Board of Trade reveals a mixed picture for the global wheat market, with domestic Argentine prices retreating despite a strong start to the planting season and a surge in trade activity.

Argentina: Planting Gains Momentum, Prices Retreat

Wheat planting in Argentina is progressing steadily, with the 2024/25 fine harvest already underway. The Ministry of Bioeconomy anticipates a significant increase in planting area, with estimates reaching 6.1 million hectares, representing a 0.24 million hectare growth from the previous year. This positive outlook is fueled by stabilized prices, cost reductions, and favorable water levels in key regions. However, the report cautions that potential La Niña events could impact crop yields.

While the domestic market initially saw a surge in harvest prices, driven by strong international demand, recent weeks have witnessed a retreat. The harvest price on Matba Rofex closed last Thursday at USD 236/t, a decline of USD 20.9/t from the peak reached on May 27. Despite the drop, prices remain attractive compared to previous campaigns, making them appealing to Argentine farmers.

Trade Activity Surges, Then Slows, Then Resurges

Trade activity for the 2024/25 cycle started strongly, with a May advance of 1.86 Mt, significantly exceeding last year's figures. This was driven by attractive prices, with 82% of traded volumes occurring at fixed prices. However, the report highlights a slowdown in trading towards the end of May as buyers became hesitant to offer high prices, complicating contract closures. The recent price drop seems to have eased buyer concerns, leading to renewed interest in trade deals, with some transactions even surpassing the adjustment values in the futures market.

Global Market Facing Uncertainties

Globally, the wheat market is facing a complex situation, with uncertainties regarding supply and demand. The report expresses concerns over the production outlook for the Northern Hemisphere, with estimates indicating potential for significantly lower output than current USDA projections, particularly from Russia. Drought conditions in the Black Sea region are further adding to the concerns.

The report also notes a pause in the recent surge of Chicago wheat prices, potentially driven by the expectation of a strong winter wheat harvest in the United States. However, the report warns of continued volatility, with the climate in the Black Sea region and demand responses to price fluctuations remaining key factors. The lower price of corn relative to wheat is also contributing to uncertainty, making wheat less appealing for animal feed.

Additionally, managed funds in Chicago have been actively cutting their short positions, indicating a shift in market sentiment.