Both the CBoT in Chicago and the Matif in Paris have followed the downward path for the first time in ages. The latest progress report from the United States Department of Agriculture (USDA), weather conditions in South America and harvest forecasts from Canada are among others to blame.
The USDA published a final progress report on the 2020 harvest at the end of November. The report is the first reason for the falling prices on the CBoT. The quality of the wheat harvest increased by 3% to 46% in the good to excellent category, while many insiders expected a plus of up to 1%. An improvement was particularly visible in the southern United States. A second reason for the falling prices is the harvest forecasts Australia. The country expects a wheat harvest of no less than 31,2 million tons. Last season the harvest did not exceed 15,2 million tons.
In addition, the wheat quotation on the CBoT in Chicago was strongly influenced by various reports that Russia wants to increase its wheat exports from 15 million tons to more than 17,5 million tons. Since wheat exports are currently the weakest link for the United States, this news also put pressure on the American wheat exchanges. The CBoT quote for wheat currently stands at $5,66 per bushel, down more than $0,30 from a week ago. This brings the quotation somewhat close to last season's level: $5,36 per bushel.
A decline in wheat prices is also visible on the Matif in Paris. On Friday, December 4, the closing price was €205 per tonne, a decrease of around €4 from the start of that week. By the way, the difference between this year and last season in Paris is greater than at the CBoT in Chicago. Last season, the Matif was quoted at €185,75 per tonne during this period. The European wheat exchanges were clearly less influenced last week by the Russian export reports and the American harvest progress report.
Canada and South America
Another reason for the declining prices is the revised harvest expectations in Canada. For example, the expected wheat harvest increased by 2% to 35,18 million tons, an increase of 8% compared to last year and also the second largest harvest ever. The harvest of winter wheat in particular has increased sharply: +63% compared to last season. This would bring the harvest this year to approximately 2,7 million tons. On the positive side, the rapeseed harvest is estimated to be lower, at 18,7 million tons. The quotation for rapeseed on Matif is the only one that has managed to hold up: €409,25 per tonne, a plus of more than €5 at the start of the week.
Finally, the improved weather conditions in South America (especially in Argentina and Brazil) play a role. This has shifted expectations from a shortage of produce to an abundant harvest. The harvest expectations for Brazil are currently 130 million tons, but with good weather this could easily be higher. As a result, the soybean price on the CBoT dropped to $11,63 per bushel, compared to a price of $11,91 per bushel a few days earlier.
Expect little change at first
Insiders expect little change in the quotations in the coming days. On Thursday, December 10, the United States Department of Agriculture will announce the final WASDE report for this year, although insiders do not expect many changes in wheat supply and demand. Adjustments in corn and soybeans may be expected and could set prices moving again.