Wheat prices can maintain their position above â200 and the corn price has even exploded. At such price levels, the probability of a decline is increasing. Is this also plausible? You can read it in this analysis, exclusively for subscribers.
In Europe, the wheat market can find few clues at the moment. The bulk of the wheat was sown under relatively favorable conditions in September and October, in contrast to last year. In parts of France it was and is wet. The United Kingdom is also wet, which is delaying the sowing, but there are no problems like in 2019.
What drives the grain market?
Russians dominate the market
Despite a rising physical price level, France is unable to sell large volumes on the export market. North Africa in particular has found its way to Russia well. In the latest Egyptian state tender, GASC, the French again caught up with the shipments all coming from Russia, despite prices being $20 above the previous tender.
Egypt is not the only country that is buying a lot. Many African and Asian countries that depend on imports now buy a lot of grains. The demand for raw materials is visible in all markets. For example, metals and precious metals are also widely traded and on the rise. This leads analysts to think that the long-term agricultural commodities are all right.
This reaction has a lot to do with the uncertainty the world is in. There was a price explosion this spring as the coronavirus hit worldwide, making food safety a top priority. As the second wave brings more and more lockdowns, countries are once again replenishing stocks. Also countries such as China, which already have huge stocks on paper. Many market analysts therefore suggest that most stocks exist only on paper. This buying behavior – at seemingly any price – pushes the physical market considerably.
Summit approaching
In Russia, $241 per tonne is now paid FOB. An increase of 2% from the week before. The exchange rate of the ruble is increasing, which is more unfavorable for the competitive position, but still not problematic. Arable farmers in the country remain reluctant, but the question is how long. Converted, the wheat price is now at 18.450 rubles per tonne. If it goes further towards 20.000 rubles, this is an important psychological limit at which growers will increase their supply. This can have a declining price effect in the medium term. At the same time, it remains extremely dry in the country, which means that the initial development is negative. That is an important factor for the price increase.
Prices in the US are also very good. On Monday, October 19, the all-time high of $230 per tonne for wheat was reached on the CBoT. The week finally closed at $232,50 and Monday, October 26, the contract for December is back in the green. The price of corn also shows a strong upward movement and that of soy has gone through the roof. China continues to purchase massive amounts of raw materials. There is also an additional element in the country: the imminent elections. Will it be Trump or Biden, the market is already reacting positively to it.
Corn is unstoppable
The corn price in Paris is also on an upward trend. Since September 1, the price has increased by no less than €28,50 per tonne. Monday, October 26, the contract with €197 is even higher on the plates and the record of €200 from 2018 is in sight. What is mainly driving the maize market are constantly disappointing yield figures from Ukraine, as a result of a major drought. The wheat market is strengthening its 'little brother' maize as a feed raw material. Both attract each other. In the US, corn crops are having a hard time due to the enormous summer storm. The harvesting conditions are also not positive. Despite the fact that the market for biofuels (ethanol) is much lower priced, maize still manages to afford a status quo.
Physical market positive
The danger of such price increases is that the fall could be just as fast. Nevertheless, analysts are still positive and so are the Technical analysis. Both wheat and maize are in the green. The yield on wheat is now 12% and that for maize is almost 20%. The physical markets have also moved along, where this was not the case before. The EU feed wheat quotation in Rotterdam stands at €217 and the stock exchange in Middenmeer is now at €200. The other regional stock exchanges traded slightly below that.