The foundation under wheat prices remains solid. The persistently high price level for wheat is also reflected in food prices. This is being felt in the wallet in the Middle East, among others. Egypt canceled another buying round. In his own words because of the price. Does this move turn the tide?
After a quiet start to the week, the wheat price in Paris rose sharply again on Wednesday. The December contract closed at €278,25 per tonne, which is another record for this contract. It is the highest price since 2012. The price level is almost 50% above the 5-year average. This is felt by buyers, who also have to bear the significantly higher freight costs.
Wheat too expensive
Reason enough for Egypt - the largest importer of wheat in the world - to cancel their most recent wheat tender on Tuesday, October 19. This is the fourth time this year that this has happened and that is a relatively large number. The Egyptian government's subsidized bread program is costing the country a huge amount of money. Egypt is not immediately without wheat. With the current stocks it can last for several months.
On Thursday, October 21, the European market price responded with a first price reduction of €2,25 per tonne to €276 for the December contract. The first resistance of €280 per ton is still a step too far for the Matif. This first requires news that justifies such a step. The American CBoT did score higher and is once again recording a plus. A small American stock and production ensures this.
Unpredictability
What does not help the Egyptian government is Russia's variable export tax. This makes it difficult for exporters to sell wheat in the future, without knowing what the tax will be at the time of delivery. Russian wheat prices rose for three months in a row and have now stabilized. The EU (France and Romania) benefit from lower Russian exports. Ukraine is also doing good business. This country has an excellent grain harvest and has increased its export quota from 17,5 to 25,3 million tons. At the same time, Russia managed to supply wheat to Algeria sold, for the first time since 2016.
After a long dry period, arable farmers in Russia have received significant rainfall in most places. The situation for winter grains can therefore be called ideal. Reason for analysts to assume that at least that much winter wheat will be sown this autumn. This concerns 28,7 million hectares according to market agency Sovecon. This could theoretically bring the Russian wheat harvest to 80,7 million tons, compared to 75,5 million tons last season.
By the way, 1,2 million tons of wheat still needs to be harvested in the huge country. Mainly in the eastern part. Some of this acreage is expected to be abandoned due to non-economic yields and winter weather.
Don't praise a threat
Not everyone agrees with the statement that the current price level causes less demand. ADM, one of the four largest grain companies worldwide, thinks that the prices in Paris will not reduce demand. This was said by ADM's chief financial officer at the GrainCom conference in Switzerland.