Wheat may be leading markets higher — what does this mean?

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When it comes to the past past, markets and market outlooks have leaned heavily to the bearish side.

Steve Nicholson, global sector strategist for grain and oilseeds with Rabobank, is one analyst who is going against the trend, at leasts for wheat and oilseeds, including canola.

Setting aside corn and beans and looking at wheat, Nicholson says there are definitely signs of a market uptick in the works.

“I don’t care if it’s in Canada, the United States or wherever in the world, among the exporters, you’re down to where you’re… in the bottom 25, in bottom quartile of stocks. And so you look at that and think, well, that’s interesting, the wheat market is heading down, and stocks are heading down. And that’s not the way it’s supposed to work.”

If you look at what’s happening in the wheat production areas, he adds, it’s been dry — in Canada, in Argentina, in the U.S., and even parts of Europe. Ukraine and the Black Sea region may be the only surprise for production; however, as Russia just continues to dump cheap grain on the world, but that can only go on for so long, he says. (more below)

Typically, we see corn lead prices higher or lower. When wheat is moving against the trend, it creates some interesting dynamics. Nicholson notes that buying patterns from key players, such as China, will have a big impact on where prices go in the next few months.

Moving to oilseeds, he says that there’s a bit of a mystery as to direction, because of confounding factors, including countries buying meal and selling oil.

“Oil is a dog of that complex because meal keeps being held up. And that’s partly because Argentina is not shipping and U.S. exports of meal and protein meal out of the North America have been very strong,” Nicholson says.

Strong demand from the renewable and biofuel market is not going away, he adds. Plus, there are weather patterns (hello, El Niño) happening across the globe that may significantly impact oilseed production, including palm oil. If that happens we could be in for very, very tight vegetable oil supply and demand across the globe, he says.

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