Inside Grains & Commodities
Wheat of 200 euros is also feasible next year
The wheat price on the Matif in Paris remains above €200 per tonne. This after several years of rock bottom prices, which meant that the acreage had to drop considerably. However, the current price also offers opportunities for the 2019 harvest.
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Choose the subscription that suits youWe have only just completed the 2018 harvest, but it is still good to start thinking about next season. Hedging part of your volume for next year can be worthwhile; especially at price levels around €195 to €200 per tonne.
Hedging the 2019 harvest
The December 2019 contract (Matif) is trading around €195 per tonne, which is around €25 below the level of the current September contract. At a price level of €210 per tonne, the May contract for 2019 currently has the highest price. For companies that grow a large volume of wheat, it can be very interesting to hedge a percentage now.
The grain market consists of deep valleys and high peaks. Production figures have been at extremely high levels over the past 2 years. On the other hand, consumption is also unprecedentedly high. Disruption in production, coupled with high demand, ensures that the situation changes quickly. We see that again this season. With that wisdom in mind, prices could be significantly lower next season.
Export Restrictions
After a strong rally, in which the bulls were in charge, the wheat market has landed with both feet on the ground. The situation remains bearish for now. There are 3 factors that can cause a change of course at this time. Analysts are keeping a close eye on the Black Sea region. About 2 weeks ago, the stock market briefly panicked when the Ukrainian government announced it would limit wheat exports. That turned out to be a storm in a teacup, but possible restrictions by the Russian government are being taken into account.
The Australian harvest remains an uncertain factor. It remains dry, while the smaller stock of the old harvest is being exhausted. In Canada, harvest has also started and further yield reductions are expected. Cool and rainy weather in the United States (US) causes the moisture content in the soil to increase. That's good news for sowing winter wheat.
Little enthusiasm
Taking a position now for the 2019 harvest is not what every arable farmer is waiting for. You must have a feel for the market and continue to monitor price movements. Dutch grain traders indicate that this rarely happens and if it does happen, it is only on request. Multi-year price agreements with customers are not offered. This has happened in the past.
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The December contract (Matif) reached €200 and is now trading around €195.
It is a potentially interesting alternative Warranty plus contract from Agrifirm Plant. The May 2019 contract (Matif) is taken into account. To do this, you sell the wheat to Agrifirm at the daily price. The difference with the quotation on the Matif is ultimately paid out as a plus at the time of sale. The minimum purchase is 50 tons.
Agrifirm started using this sales method in 2017. You do pay a premium, which depends on the price level. Given the current high level of daily prices and sentiment in the market, it remains to be seen how much benefit the contract currently provides. However, those who did business in May or June can now benefit.
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