Inside: Grains & Raw Material
Will wheat prices continue to rise in Europe?
In Europe, wheat prices for arable farmers are at their highest level since the harvest. A continued high demand from the industry and feed sector is the driving force behind this. But will wheat prices continue to rise?
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Choose the subscription that suits youThe wheat price is particularly supported by global developments, with drought in Argentina, the US and Australia supporting stock exchange quotations. Only 30% of US winter wheat is in good condition, the lowest percentage in 20 years.
In the WASDE report the USDA has reduced the Argentine harvest by 7 million tons to 40 million tons (last season's 57,8 million tons) compared to the March report. In addition to these reports of less supply, wheat prices in Europe are benefiting from the trade war between US and China, the rail freight strike in France and the lower exchange rate of the euro.
Increase not permanent
However, it is not expected that prices will continue to rise, because the main players in the grain market will soon have their own harvest. Last week there was already a correction due to the WASDE report in which high grain stocks were reported. This led to a drop from €168 per tonne on April 9 to €165,5 on April 12 for the May contract.
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The wheat price showed an increase, but now seems to be tempered.
The export of European grain has also been reduced again. The low export is partly explained by greater domestic consumption in the EU due to increased demand for feed. However, this does not explain everything, lower exports inevitably lead to a build-up of inventories.
European expectations
The expectations for the new harvest in Europe remain good for winter grains. As far as summer grains are concerned, expectations are less positive. Due to heavy rain, there has been a delay in sowing summer grains, but the application of fertilizer and crop protection products is also lagging behind.
Situation Russia
The expectations for the winter wheat area in Russia for the coming season are 17,1 million hectares, which is 300.000 hectares less than this season. According to analyst firm UkrAgroConsult, 15,8 million hectares are in good condition and that was significantly higher last season (16,63 million hectares). Despite the sharp depreciation of the Russian ruble, wheat prices, expressed in dollars, remained at the same level or even slightly higher. This also has a price-supporting effect on the European wheat market.
Regional wheat quotations are showing an upward trend.