Now not only in the Black Sea region, but also across the EU, driving the combines can give a better picture of wheat yields. They are largely as expected. Disappointing figures gave the price some support, but this recovery is fragile.
The September contract on the Matif saw a recovery last week (week 30) from Tuesday. Ultimately, the price ended up €4 higher, at €185,75 per tonne. Compared to the 5-year average, this is a positive price level, which is €6,50 above the average level. Harvest pressure normally causes prices to drop until early September. The wheat price is not expected to drop this season, but an upward breakout is equally unlikely.
Confirmation for smaller wheat harvest
The futures market was supported, among other things, by reports from the International Grains Council (IGC) in London. They cut their global wheat yield forecast by 24 million tonnes on Thursday, July 6. That is more of a confirmation of the facts that were already there, but it does give price formation a boost. IGC expects that Argentina will sow fewer hectares of wheat because the sowing season is wet.
The American Midwest is also experiencing persistent rain. This is positive for crop development, but negative for price formation from an arable farming perspective. The corn price in particular is under pressure on the CBoT. A low dollar rate helps the US export engine, which has had several successes shipping soy and also wheat to China. This country also bought a record amount of soy from Brazil. A stable and high euro exchange rate has a negative effect on exports here.
Farmer hesitates to sell
A stable to rising wheat price ensures that arable farmers hold on to their harvest for longer. This is difficult for exporters who are trying to meet obligations. This is the case in France, but even more so in the Black Sea region. This keeps physical prices at the same level, because traders have to dig deeper into their pockets to get supply.
This is not immediately noticeable in the Netherlands. The Rotterdam quotation of EU feed wheat in particular has been on the rise since the end of June. The price also rose in week 30, to €193,50 per tonne. The 'farmer prices' do not show this increase. The Goes stock exchange was the only one to rise, with €1 per tonne. The Middenmeer and Emmeloord exchanges posted their first quotations for the 2020 harvest, which amounted to €170 and €173,50. This price level is a few euros below the start of last year.
Harvest continues smoothly
In northwestern Europe, farmers have to harvest their crops between showers. This does not yet cause any major inconvenience. Wheat is being harvested in abundance in France. Figures from France AgriMer show that almost three quarters of the wheat has been harvested, compared to 50% a week earlier. The harvest is also continuing smoothly in the Black Sea region. Now that arable farmers are starting to grow better crops, yields are also increasing. The average is 3,5 tons per hectare, which is 6% less than last year. When the season started, the yield was still 30% lower.
Conclusion
It is mainly the yield meter that determines the price at this stage of the season. Persistent drought has given prices a foundation that is above average. If the proceeds are better than expected, the prize can be surrendered again. €180 is currently the bottom. A significantly higher price level is unlikely, given current expectations. The outbreak of new outbreaks of the coronavirus has so far had little or no impact on the grain market. The massive hoarding – as was seen in March – is not visible now. Countries are looking more closely at their own supplies and are no longer allowing unbridled exports. This plays an important role, especially in Russia. This can benefit price formation.