Wheat price rises under the influence of drought

There are concerns about the tightening global supply of wheat. However, there are far more concerns about the grain harvest in Russia, France and the rest of Europe. The wheat listing on the Matif in Paris rose to €182,50 per tonne. The US stock exchanges were closed yesterday (Wednesday, July 4) because of Independence Day.

The wheat price also rose sharply on the regional stock exchanges. For new crop wheat, €170 per tonne was quoted on the Middenmeer stock exchange. That is €12 more than the previous quote. The reason? The connection to the new harvest, because the previous quotation was still partly based on the Matif in Paris.

The drought in Europe also plays a role. Copa Cogeca, the European organization for representatives of the agricultural sector, expects a lower grain yield (-6%). "Farmers in the center and north of the European Union (such as Estonia, Latvia, Lithuania, Denmark, Sweden, Poland, Germany and Finland) have been hit by severe drought, which could be catastrophic," said President Max Schulman. 

Physical Trading Price
The €170 per ton is now mainly paid for by trading, reports Jeroen de Schutter of Agrotheek. "Now that we are still in the harvest, no transport costs are paid. That will apply until October. The futures market is now quoted almost €185 per tonne, and until October I actually only get the transport, storage and removal costs from. Then you come to about €170 per ton."

De Schutter sees that the wheat growing season in the Netherlands is being shortened by the drought. "We are now in the month of grain filling, and this will be disappointing due to the drought. On the other hand, winter barley has a good yield this year." In Europe, all crops are signed due to drought.

Trade expectantly
It is striking that there is currently little, and a wait and see, demand from the industry. "The industry expects prices to continue to fall. However, in the really dry years you saw that the wheat price rose towards €200 to €240. The market, on the other hand, is looking a bit more volatile at the moment," says De Schutter.

For corn and soy, Friday 6 July an exciting day. It is an important date, as Chinese import tariffs on soybeans from the United States (US) are likely to come into effect on this date. It was expected that Brazil would 'take a while' to export these (soy to China) would take over. However, it remains to be seen whether Brazil can take full advantage of this situation, partly due to the great chaos in the country due to strikes.

Soy continues to fall
China is importing more soybeans from Brazil, while the export of soy from the US is decreasing. The quotation for soybeans has been falling sharply for some time (mainly due to the tensions). The stock also fell last week. It is now trading at about $310 per tonne. In the US, soybean conditions have eased slightly, which is a price support factor.

The maize market is also showing a downward trend, partly due to the expectations of a good harvest in the US. However, the price did increase on Tuesday 3 July. This is due to concerns about the extreme heat in the Corn Belt, where the critical pollination phase of the crop is currently taking place.

Less corn in Russia
In addition, recent rains have worsened harvest prospects in Southern Minnesota and Northern Iowa. The estimate of Russia's maize harvest for this year was lowered by the Russian analyst firm IKAR from 12,8 million tons to 12,3 million tons. This is due to unfavorable weather conditions in the southern areas.The wheat quotation on the Matif is clearly volatile, but on an upward trend.