The Parisian futures market Matif opened above €20 per tonne for the first time in 14 months on Monday morning, April 200. The most current wheat price already reached its peak for 2020 the Friday before, only to climb further on Monday. Drought, global hoarding and export restrictions are grist to the bulls' mill.
The last time the Matif traded above €200 per ton was in February 2019. In early 2019, the price rose to a top of €206 per ton, before trading above €200 until the end of February. The highest price of the 2020 harvest was reached on Friday April 17, with a price of €198,50 per tonne. A narrow difference with the previous peak, at the end of January. At that time the price was €0,25 lower. At 14:30 PM on Monday afternoon, the Matif is trading at €205 (+3,4%).
While the Matif recovered after Easter – after a small dip – the CBoT continued to trade lower. Despite the smallest wheat acreage ever in the United States, exporters find themselves priced out of the market by a high dollar exchange rate. On Monday afternoon, April 20, the Chicago futures market also recorded green figures, with a price of $196 per tonne.
Export quotas
Market analysts expect Russia's export quota to be reached at the end of May or beginning of June. The quota set by the agriculture ministry for 7 million tons of grain still has 4 million tons to go. This quota has been introduced to prevent wheat prices in the country from rising too much. The price for new crop wheat has fallen by $3 to $199 per tonne as government stocks are sold off. That is the lowest price level since early March in Russia. Due to the corona crisis and good exports, wheat prices have been rising for weeks. The price level for wheat with 12,5% protein is now $232 per tonne FOB.
Just like in the European Union, drought also plays a major role in Russia and Ukraine. In those countries it has been dry since sowing. In Central and Western Europe, grain crops are struggling to grow after the wet winter and lean weeks this spring. Sown summer grain has difficulty with emergence. Reason for market agency IKAR to adjust their expectations for the Russian and European wheat harvest downwards, which could cancel out a Russian acreage increase of 5%.
Long-term
Will a wheat price above €200 remain feasible for the longer term? That remains to be seen, although nothing can be said with much certainty. Some rain fell in Russia last week, although not much. Expectations remain meager. If precipitation is not forthcoming, the price may continue to rise.
The new barley and wheat harvest will start in the far south of Russia at the beginning of June. Wheat shortages are therefore of a relatively short duration, when the export restriction actually comes into effect. The export ban applies until July 1. However, during this period the price can spike significantly if conditions are favorable.
Also banned in Ukraine?
Ukraine is also considering an export ban if too much wheat is exported, a government employee told the Reuters news agency. The country has now exported 50% more wheat in mid-April compared to a year earlier. The Americans in particular hope that a ban will create more demand for their wheat, because pre-arranged Russian wheat contracts may not be able to be fulfilled by exporters in the country.