The wheat price continues to fall. In week 36, Europe even recorded the lowest price of the past 1,5 years. What is going on?
While the wheat price still showed an upward trend in mid-May, the price has now plummeted. The Matif in Paris came in at €4 per tonne on Wednesday 158,25 September. The wheat price on the CBoT in Chicago has also fallen sharply, as it falls by more than $2 to $30 per tonne in 167,64 months.
At the beginning of the summer (due to the dry weather) disappointing harvests were still expected, which resulted in price increases. Although the harvest in certain countries was actually less (such as Russia), the influence of the drought has been limited across the board, both in terms of yield and quality. As a result, a large volume of wheat came onto the market as a whole. According to an earlier message worldwide it was 30 million tons more than in 2018.
Strong competition in export markets
The big exception in this story is Australia. That country is struggling with a disappointing harvest, which mainly finds its way into the domestic market. Worldwide, however, there is more than enough supply, including from the United States. This is the main cause of the current price pressure. It leads to competition in the export markets. The high exchange rate of the US dollar also affects the wheat price, because the world market is settled in dollars.
Whether the wheat market can count on a recovery in the short term remains to be seen. Rabobank reports in a report that the sector has a record amount of wheat in stock worldwide (accounting for almost 38% of annual sales). The drop in demand from China due to outbreaks of African swine fever, in combination with the good harvest in the Black Sea region, means that there is little prospect of recovery in the short term.