The price level of €300 per tonne was briefly touched again on Thursday afternoon, November 18, after the December contract for wheat on the Matif had to give up sharply at the beginning of this week. The price eventually closed €3 lower. How long will it take before we see €300 as the final amount on the boards?
The price of wheat in Paris rose by €8 per tonne on Thursday to €297. This meant that the peak of Friday November 12 was just not reached. Then the price closed still €0,75 higher. Two factors mainly underlie the latest price increase. It turned out that Algeria bought 600.000 tons of wheat in its last tender. Russia may supply 250.000 tons of this, but the EU is also participating. That strengthens the market. In addition, Russian export restrictions continue to concern people.
psychological boundary
It remains to be seen whether the price increase is of a structural nature or not. The €300 level remains a partly psychological limit for now. If the shortage increases, and the price level in the physical market continues to rise, it is quite possible that this level will actually be seen as structural. It will take some time before it has an effect on the physical market, although in Europe the price for baking wheat is already €300 or more.
On November 18, the Rheinische Warenbörse Köln quoted €306 to €307 per tonne for baking wheat for January/March delivery. The Rotterdam feed wheat price rose to €44 per tonne in week 306 and will stand at €299 this week. That level is still far away at the regional fairs. At €284, the Groningen stock exchange recorded the highest price this week. A physical price that is 5% below the futures market can be considered normal to good.
A matter of time
The chance that the €300 will be won is actually a matter of time. The European wheat harvest is not going well this year. Especially in France. This concerns baking and milling wheat with the correct specifications. This is what the Matif notes. Traders are already wondering out loud whether the Paris price is a good representation of the entire grain market. With the current export volume and persistent demand, there is a good chance that the EU market will be sold out in early 2022. It will take some time before this price level is also reflected in the physical market, as Jaap Haanstra also said in an interview in the studio of Boerenbusiness explains.
In the interview, Haanstra says: "The biggest danger of a high wheat price is the price itself." The French market agency Strategy Grains also reports this. In its latest export forecast - published on November 18 - the agency makes significant cuts to European export expectations. Buyers are deterred by the high prices and are more inclined to purchase corn. In the November report, EU wheat exports are reduced by 1,6 million tonnes to 30,4 million tonnes. The closing stock is adjusted upwards by 2 million tons to 12 million tons. Corn consumption will be increased by 1,5 million tons.
Storm and rain
If we zoom out to the world stage, a number of things stand out. For example, major storms in Canada have prevented wheat and other grains from being exported through the port of Vancouver. More than twenty ships are currently waiting to be loaded. In addition to the extremely small grain harvest, it is another major blow for this country. We have seen export problems due to weather extremes more often this season. The consequences can be enormous.
Australia is also wondering how to export its large wheat harvest as quickly as possible to meet buyer demand and cash in. Heavy rainfall means that the combine harvesters can only do their work sporadically. In addition, the quality of the wheat is now also starting to suffer from rainfall, which in some areas amounts to well above 100 millimeters. China in particular is a major buyer of wheat, barley and oilseed rape in Australia.
Thinking about 2022
Arable farmers have been very busy sowing wheat in recent weeks. In the Netherlands but also elsewhere in Europe. The circumstances for this are good. It is difficult to say whether more will be sown in our country. Seed sellers do not dare to make any statements about this. With the higher price level in the short term, the price of the September 22 contract on the Matif also rises. That closed on November 18 at €262,25. The ten-year price level stands at an average of €196,10. Acting now to secure part of the 2022 harvest has become very attractive.