Inside Grains & Commodities
European wheat market is bottoming
The precipitation in the western and central part of Europe has brought relief to the very dry growing areas. It ensures that revenue expectations remain positive. Together with the unfavorable export position, this causes wheat prices to fall. The Black Sea region is closely watched on the world stage.
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Choose the subscription that suits youWhile almost all spring wheat in the United States had been sown at the beginning of this week, the harvest of winter wheat (Hard Red Wheat) is also underway. Nearly 25% of all wheat has been harvested in Texas, although this harvest is still in the starting blocks elsewhere. Due to excessive rainfall, especially in Oklahoma and Kansas, American grain companies expect lower quality. This creates more demand for wheat from the old harvest (with a higher protein content).
Drought in Russia
This news, coupled with the ongoing drought in large parts of Australia, puts a solid foundation in the Russian grain market. The market there is trying to reach a price level of $200 per tonne FOB, delivery in July. Drought also plays a role in parts of Russia. In the Volga (center) and Stavropol (south) regions it is very dry. The drought, coupled with high temperatures, is expected to continue throughout June.
In the Krasnodar region, which is located in the far south and near the Black Sea, the winter wheat harvest is said to start this week. According to insiders, drought has had no impact. The sowing of spring grains is almost complete and there are 28 million hectares of summer grain in the ground, compared to 25,8 million hectares last spring.
Due to the drought, analysts are slightly lowering their harvest expectations. The Russian ministry speaks of a wheat harvest of 75 million tons, compared to 72,1 million tons last year. This makes it negative. Analysts are more likely to think of a volume of up to almost 82 million tons.
Rain on time
France, Germany, Poland and the United Kingdom have benefited from recent rainfall and the rainfall was much needed in many areas. Despite the local damage caused by the storm, the rain provided relief in time. Only Northern Germany remains extremely dry, which results in lower yields. In Spain, yield expectations have also been adjusted downwards.
De matif recorded a lower price on Monday, June 10, and that trend will continue on Tuesday, June 11: the price fluctuates around €176 per tonne. In addition to better yield expectations, it does not help the market that the export opportunities are estimated lower. This is partly due to a more expensive euro versus the dollar and ruble. According to data from the European Commission, European wheat exports are virtually the same as last year.
Sales season 2019/2020
Russia is likely to retain its position as the world's largest wheat exporter. Saudi Arabia also announced that it is in discussions with Russia about the purchase of wheat from the new harvest. This country is an important customer of Germany. Such reporting therefore has an immediate negative effect on the European grain market.
The Egyptian state office GASC issued a tender for wheat on January 10. The traders are waiting for the results to get a better picture of the market and the price level. The cheapest provider in the tender comes from Romania, followed by Russia. The list of providers is completely filled in by these 2 countries.
Expectations
With more changeable weather in the pipeline, pressure on the market remains high. Reporting on drought in the Black Sea region also has an impact on this. The European export position is of great importance, so no strong upward movement in prices is expected in the short term. Only when the wheat harvest in Russia and Ukraine drops sharply in yield will the market respond with a price outbreak.