After an exceptional week, the wheat market is looking for the 'new normal'. A term that is now doubly loaded. The main question here is whether a structural price level above €300 per tonne is feasible. The physical market also continues to grow.
The international market was eagerly awaiting the results of a new tender round from the Egyptian state agency GASC on Monday, November 29. The suppliers came up with prices between $350,85 per tonne and $362 per tonne, excluding freight costs. Including freight costs, prices rise to almost $390, not far off the level of $400 per tonne. Converted, this concerns price levels from €311,05 per tonne to €320,93 per tonne.
Russia no longer a price fighter
Romania is the cheapest provider, followed by Russia. Compared to the previous round - in which Egypt bought a measly 60.000 tons - the price has now increased by at least $4 per ton. The results also clearly show the impact of Russian export taxes on the export position. Wheat exports from Russia are almost a fifth lower than last year. Turkey purchases the most Russian wheat, followed by Egypt and Kazakhstan.
Wheat, barley and rapeseed are being harvested again in Australia. New South Wales in particular has been hit hard by the heavy rainfall. Not all plots and roads are accessible. It is now a matter of estimating how much the wheat has reduced in quality. The volume runs into millions of tons, especially now that the world market has a great need for baking wheat. The combine harvesters are also running in Argentina. There the harvest is progressing more positively and the yield has been adjusted upwards.
Fear of new corona variant
The main cause of why the global grain market closed lower on Friday afternoon, November 26, is the new Omicron variant of the coronavirus. The grain market is based on a recovering economy, but with such uncertainties in the market, that idea quickly disappears. Yet this new mutant does not reduce the demand for wheat.
On Monday, November 29, it was mainly American stock markets that opened on a more positive note. The Matif reached a level above €300 per tonne in the morning, but was already trading sharply lower on Monday afternoon; at €293 per tonne. A decrease of €6,25 from Friday's closing price. Due to technical problems, no recent export figures for French wheat are available. According to figures from the European Commission, 10,27 million tonnes of wheat have been exported from the European Union so far this season. Only 822.000 tons come from France, compared to 3,2 million tons from another source. Given that French exports this season are 25% above last season, the Commission figures are distorted.
Less export and processing
Another issue the European Union has to deal with is the physical price level of wheat. This means that exporters literally price themselves out of the market. This makes it more interesting to process grain maize, especially for industry. Consulting firm Strategy Grains has therefore reduced the export figures for European wheat by 1,6 million tonnes to 30,4 million tonnes. The use of wheat as animal feed is also reduced, because more use is made of corn. According to Strategy Grains, the ending stock of wheat in the European Union will increase by 2 million tons. Corn exports have increased by 1,5 million tons.
The European wheat price is running out of breath now that it has reached a peak. We have to wait for news that will change the situation. A worsening of the situation in Australia, for example, or a restriction of Argentine wheat exports. Then we have to wait to see how the grains come out of the winter and how the growing season starts.