The European futures market quotation for wheat has had a hefty rollercoaster ride. This afternoon (November 26) the contract is trading below €300 per tonne again and there is also a good chance that the closing price will fall below this level. What lessons can we draw from this exciting week in the wheat market?
After a week ago the December contract for wheat on the Matif just failed to reach €300, it more than succeeded at the beginning of this week. A closing price of €311,50 per ton was even reached on Tuesday. New harvest – delivery in September – amounted to €272,25 per tonne. After such a significant increase, a setback is almost inevitable. The bulls who push the market higher must be continuously provided with news facts that justify a further step.
Australian news
The bad news from Australia in particular hit the world market like a bomb. Especially now that quality is such a major issue - and the Russian alternative is under lock and key and high export taxes - there was a need for a high-quality product. Persistent precipitation down Under has caused good harvests to suddenly become feed wheat or even worse, no longer usable at all. The state of New South Wales has been particularly hard hit.
What plays a role on the international market is that the entire United States enjoyed a stuffed turkey on Thursday, November 25, during Thanksgiving Day. Lack of news from North America also means a pause in Europe. This does not apply to grain maize. The Matif quotation continues to rise and closed on Thursday at €259,50, but also drops sharply on Friday. In the afternoon, the contract for January delivery is almost €7 lower. The harvest in Northwestern Europe has still not been completed due to the late ripening. Moreover, the fuel costs are enormous to dry the corn.
World politics
In addition to the ups and downs on the fields of Australia, Europe, Russia, North and South America, there is world politics. The economy in China and developments surrounding the coronavirus are also keeping the grain market busy. Uncertainty can drive up prices when countries start hoarding, but they simply cannot do much more than the current policies they are pursuing. If the economy takes a hit, the purchasing power to purchase those expensive grains will also decrease. The market therefore interprets the news negatively. For example, a new South African corona mutation.
The long-term outlook for wheat remains as positive as ever. The physical market has taken a step – supported by the forward quotation – and is not slowing down any time soon. Insiders report that wheat can now also be physically made at €300 per tonne in the Netherlands. The Northern Netherlands quotation this week is €291,17. Higher transactions should become visible in the listing next week. The EU feed wheat price on the Goes wholesale exchange is significantly higher at €312.
If we look at the countries around us, prices are also recorded above 300. The Cologne Wholesale Exchange quotes €316 to €317 for baking wheat. Feed wheat is at €307 to €308. In France, the stock exchange in Rouen quotes €306 for baking wheat.
Winter coming
We now have to wait for news that will give the market new direction. For example, the development of grains in the Black Sea region and Europe. The first signs of winter will arrive in Europe next week. Various reports predict a harsh winter, but some caution is required! We have not noticed any of this in our country yet. Tenders or export orders, such as recent purchases from China in France, can support the European price level.