Farmers are likely to continue shifting their trading activity to the spot market in 2025, at the expense of forward sales, which is likely to pressure trading firms' margins because growers can largely afford to withhold product until bids reach a preferred level.
For wheat specifically, currency volatility in major producing countries and more favourable prices for alternative crops could continue to disincentivise forward wheat selling into 2025.
Higher on-farm storage capacity and, in the case of much of the Black Sea region, increasing government support for farmers, such as through more favourable loans for inputs, will facilitate this spot focus by alleviating pressure to offload stocks.
Farmers' focus on prompt volumes is likely to be increasing volatility in the market — instead of steadier forward sales, farmers instead are more likely to come to the market simultaneously, resulting in more concentrated bursts of selling of spot supplies.
Black Sea farmers eye traders' short positions
Producers in the Black Sea — with the exception of Russia — have all shifted to prompt-only selling. Farmers keep their focus on the spot market, benefiting from their ability to hold back from selling until trading firms need product to execute previously agreed sales when vessels arrive at port.
This can leave trading firms under pressure to source volumes at a farmer-set price, because the former often take further-out short positions in destination markets. This is especially true of volumes sold under buy tenders, where trading firms may have offered on an origination basis, leaving no room for competition pressure.
This trend of prompt selling is reflected in Romania's Constanta port, which has a heavy line-up for November and a December line-up that is filling quickly, the latest port data show, while positions for January are so far empty.
The traditionally more spot-focused market of Russia is set to continue limiting activity to the near term, deterred from forward markets by floating export duties, which change week-on-week, and a volatile rouble-dollar exchange rate.
Sellers freeze out high-protein market
Two major producers of high-protein milling wheat, Canada and Australia, have largely held back from farmer selling so far this year, with stock retention encouraging farmers in both countries to continue holding onto product in anticipation of higher prices.
Canada and Australia typically compete in similar high-protein import markets, particularly in Asia. But both have so far resisted pressure from forecasts of higher output and exports for 2024-25, according to the Argus AgriMarket Outlook. Australian and Canadian are opting to hold onto wheat stocks in the hope of more favourable prices and the return of China to the global wheat import market.
A slow start to Australia's wheat harvest campaign, and subsequent quality concerns as crops extend their exposure to recent wet weather, have deterred producers from forward selling, instead choosing to let go of stocks on an as-needed basis.
And Australian farmers have been further disincentivised from letting go of wheat crops, opting instead to take advantage of attractive global chickpea prices, in combination with a forecast for Australia's chickpea output to more than double on the year to 1.9mn t in 2024-25. Chickpeas have priced at a premium after India's temporary removal of tariffs on the pulse crop.
Canadian sellers have, in turn, found incentive to withhold sales, eyeing potential support to Canadian Western Red Spring (CWRS) prices as global exportable high-protein wheat supplies tighten.
And Canadian producers have enough storage for up to two harvests' worth of crop, market participants said, further weighing on any incentive to sell.
Sellers in the US have taken a similar stance, refraining from forward selling as increased wheat production from a year earlier has pressured prices, causing producers to adopt a wait-and-see attitude for those that have ample storage to hold onto harvested volumes.
