On average, the price of wheat on the futures market will get a plus at the end of the year. Can we count on that this year as well? In view of the relatively high price level, that remains to be seen. Let's take a look at the factors that play a role.
If we look at the Matif (in Paris) in recent years, an end-of-year bonus is usually noticeable. However, it is highly questionable whether there will be a plus for wheat this year. Over the past 2 weeks, the price of wheat has already increased tumultuous period behind us. On Monday December 2, the Matif reached a closing price of €186,25 per tonne for December. The highest close since the end of April.
Price peak already occurred
If we compare this with the price peak of the 4 years before, this result is already higher. In week 50, the average peaked at €186,45 per tonne, because the wheat price has not been at a booming level in recent years. Towards the end of the year the price then falls back by a few euros.
There are 2 important factors that influence Europe. On the one hand, there is the area of winter wheat. Due to wet conditions and expectations in the last weeks of December, it is expected that not all hectares will be sown. This is the case in France, among others, where 10% to 15% still have to be dug into the ground. Much more sowing still needs to be done in the United Kingdom. The arable farmers here have usually already given up hope and ordered summer grain.
Export engine
The other factor is exports. Europe's export engine is running at full speed. At the current price level, wheat (from France, among others) remains competitive on the world market. Wheat from North America is experiencing export problems due to the price level. Physical prices in Russia also continue to creep up, which is favorable for the European situation.
The mood on the grain market has now become more subdued and the Matif is lower again on Monday, December 9. The news that Australia is harvesting significantly less wheat (up to 35% less locally) has already been taken into account by market analysts and traders. Yet these figures are still being tweaked. The renowned market agency FCStone is another 5,6% below the official figures in terms of yield expectations.
Cashflow
Considering all these points, the bottom end of the wheat market feels solid. World production is at a high level, but so is consumption. Some grain growers, such as in North America and Russia, will naturally start selling some as the year ends. Cash flow is required to pay the bills. Due to long endurance, especially in the Black Sea region, growers have been able to postpone their sales moment for a long time. Due to more supply, the market continues to move at a moderate pace.