Favorable growing conditions in Europe and the Black Sea region ensure positive yield expectations. This means that the first phase of the wheat export season is urgent. A price reduction makes European wheat competitive.
At the end of last week, both the American and European futures markets closed on a negative note. This was partly due to a court ruling on biofuels in America, which had major consequences for the corn market there. Wheat was followed in that wake and we also noticed this in Europe. What is also weighing on the European market is the upcoming harvest.
European dominance
On Monday, June 28, the Egyptian state agency GASC issued a new wheat tender for delivery at the end of August. Wheat from Romania dominates the supply. Ukraine and Russia follow. France participated with only 1 bid at a much higher price level. The cheapest wheat was offered from Romania for the equivalent of €203,89 per tonne. The most expensive Romanian wheat came in at €206,46. In total, Egypt purchased 180.000 tons of wheat.
Offering is one thing, but exporting is another nowadays. The Egyptian government is struggling with this. Shipping transport is still severely disrupted, transport times can hardly be met and freight traffic is very expensive. This will certainly affect the grain market next season, which starts July 1. The freight costs per tonne from Romania are quoted in the tender at €1 to €22 per tonne and that is significant.
Heat wave
On Monday, wheat prices turned green after Friday's loss. That happened in both Paris and Chicago. On Monday afternoon, the Matif price is trading at around €203 per tonne for September delivery and the December contract is slightly above that. The €200 level has therefore been averted for the time being. There is also a small gain on the CBoT. It is extremely hot on the western side of the US. Concerns about summer grains are therefore increasing again. Other crops are also suffering from the heat wave with temperatures up to 44 degrees Celsius this week. Canada is also struggling with extremely high temperatures and drought. That could send the wheat market to higher prices.
Harvest starts carefully
In the short term, we have to look for the news closer to home. The grain harvest has started in the south of France. This mainly concerns winter barley, of which 1% has been harvested. The status of wheat crops in the country was slightly downgraded last week. Especially in Northern France, the crops still have a while to go and moisture is desirable. Harvesting is done carefully in the Black Sea region. The harvest started later there too. Thanks to warm weather, the harvest pace is expected to accelerate this week.
Analysts in America are limping on two legs because the weather forecast for the east coast calls for rain. In combination with high temperatures, this means growing weather for corn and soy, to which the market can respond. In addition, the USDA will release new acreage figures on Wednesday, June 2. According to analysts, the question is not if, but how much the area of corn and soy will increase. The futures market may react strongly to this. Especially in combination with stock and revenue figures that will also be published.
Quality
The grain market fluctuates during this phase of the growing season, leading up to harvest. Weather events alternating with export expectations and the expected harvest dictate the rates and prices. The combines will start later in the EU this year than we are used to, so it remains to be seen what the actual yield and quality will be. Especially in countries where a lot of rain has fallen, such as Central and Eastern Europe, there is concern that the quality requirements for baking wheat are not being met everywhere.