Inside Grains & Commodities
When will the wheat price free fall stop?
Wheat prices have been in free fall since mid-February. In less than 3 weeks, the futures market in Europe fell by more than €10, and physical prices are also being dragged along. Will the limit of €190 per ton also be lifted, or has the bottom now been reached?
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Choose the subscription that suits youThe March contract on the Matif in Paris closed slightly higher at the start of week 10 (€192,25 per tonne), but had to make a significant drop again on Tuesday, March 5. As a result, the price closed at €190, while the contract is approaching its expiration date. The much larger May contract has been trading below that limit since the end of February and now stands at €187,25. €177,25 is paid for new harvest wheat. This price still appears fairly stable.
Declines in Russia
Wheat prices are also in a downward spiral in Russia. The export price for wheat, including transport, is now €207,25 per tonne. This means that the price has fallen by €1 in 4,40 week. Market analysts cannot pinpoint the direct factors for the decline, but it may be related to the fact that growth conditions in Europe are better than expected and Russian exports continue to boom.
Russian wheat exports have been adjusted upwards again for the 2018/2019 season. The smaller supplies were expected to run out quickly in the new year, reducing exports and giving Europe and the United States their chance. However, this scenario did not unfold. The Russian Federal Statistical Office has also increased the figures for the 2018 harvest again. In addition, the agriculture ministry continues to sell wheat stocks; This season, 1,63 million tons of grain have already been sold.
Positive news about American grains
The downward trend in Europe is reinforced by the progress at the CBoT in Chicago. There, the wheat price reached its lowest point on Monday, March 4: $164,15 per tonne. The next day some recovery was noticeable. The grain crops are in relatively good condition, with little wintering and sufficient moisture. In Europe, this remains a concern for almost all countries.
The negative news on the European wheat market continues to dominate. An early spring doesn't help with that; the sowing season for spring grains has started 1 month earlier in Ukraine. The corn price on the Matif is also being dragged down. This is also expected in the short term negative.
Larger wheat harvest expected
What does not help the market are the higher expectations for the 2019 harvest. The Russian Ministry of Agriculture estimates the wheat harvest at 75 to 78 million tons, which would make the harvest 4% larger than last year. Some market analysts expect a harvest of 80 million tons, but this depends entirely on the weather.
In Europe, the International Grains Council (IGC) also expects a larger harvest, partly because the wheat area has increased by 3,5%. Although it does reduce wheat production worldwide. Since consumption also decreases, the final stock will change little. These figures do not help the market negative trend to break through. Positive European export figures do not change this either. Across the board, these remain disappointing for this season.