The prices of wheat and grain maize have dropped significantly this month. As the end of the year approaches, the share price is picking up a bit. However, the short to medium term outlook is uncertain. What can we expect at the beginning of 2022?
The low for wheat was reached on Wednesday, December 15, at €275,75 per tonne for the March contract. Especially this week the price went up again. On Monday, December 20, the price closed at almost €280. On Wednesday December 22 that was already €292,75. An increase of 4,5%. The January contract for grain corn already reached its peak on Tuesday, December 21, at €244,75 per tonne.
South America drives market higher
Drought in South America is currently fueling the bulls in the grain market. Unfavorable conditions impact the soy and corn markets. Until now, analysts had expected a large harvest in Brazil and Argentina. This may turn out to be lower if the drought continues. Expect fluctuating prices in the coming weeks, which are strongly influenced by the weather forecast in this part of the world. If sufficient precipitation falls, it will depress the price and vice versa.
The omikron variant – and especially its impact on the world stage – is the other important player. The consequences of new lockdowns in many countries mean fewer travel movements (less fuel consumption and/or demand), less consumption outside the home and an uncertain mood. Especially in the current period when there is a lot of consumption, it really slows down the festive mood. Yet, on the other hand, the uncertainty means that countries are inclined to watch over their supplies. It is easier to purchase raw materials at higher prices.
Harvests well in the southern hemisphere
What the wheat market is dealing with is the harvest in Australia. After a wet start in the east, the combining process went smoothly on average. Especially in Western Australia. Revenue figures have been adjusted upwards now that more is known about the size. Quality figures are often reduced due to the impact of heavy rain. In Argentina, about three quarters of the wheat has now been harvested. The figures there are also positive.
Weather conditions are examined in the Northern Hemisphere. We also had a taste of winter in our country. In many parts of the Black Sea region there is insufficient snow cover to properly protect crops. Temperatures have now dropped to minus ten, which can certainly have consequences for the grains.
In the United States it is especially very dry. In mid-December, the 'US Plains' were even shocked by a major storm, which is most reminiscent of the 30s. The extent of the crop damage has yet to be determined. It will reportedly remain too dry for this time of year in the coming period.
Wheat remains in demand
The wheat market also continues to monitor the weather forecast worldwide to find direction in wheat production this and next season. A changing rate is therefore likely. If we look at the physical market in the Netherlands, we see that wheat prices have stabilized around €280 per tonne. Looking at the stocks and expected ending stock, grains remain scarce and the ending stock is extremely tight. A good harvest in 2022 should make up for this. If that does not happen, the current sentiment will continue for another season. The September contract in Paris is now trading at prices below €260 per tonne.
Rapeseed price unprecedented
In the meantime, rapeseed has its own plans and can rightly be called black gold. A new (hefty) reduction of Canadian yield figures has given the market new impetus. On Wednesday, December 22, the Matif closed for February delivery at €746,75 per tonne. On Thursday afternoon the price was even €753,75. The offer for harvest 22 is now €560 per tonne. Despite the fact that the area in the European Union has increased significantly, the market is not being held back by this. The price for vegetable oils remains very good.
However, the consequences of the coronavirus can also have an impact on this unprecedented price revival. Less consumption means less demand for oils and less transport means less fuel. Given the extremely small global rapeseed harvest, this does not create an imbalance in the current market, but a decline is possible in the short term.