Wheat quotes took a beating on both the CBoT and the Matif last week. The US stock market is closed today but the Matif is showing a cautious recovery. Did the mrtk react too violently last week?
The decline in the wheat price is partly due to the Wasde report of January 12. However, it is too easy to attribute the losses on the stock market entirely to this. For example, US export figures show that wheat exports from the 2021 crop are lower compared to last year. Last week the area of winter wheat was added. According to the preliminary USDA figures, 13.920.120 hectares of winter wheat have been sown. With a growth of 2% compared to last year, that is slightly above what the market was counting on and the largest acreage in five years. The reports of drought in parts of the Great Plains have hardly any effect on the market.
Good harvest in the southern hemisphere
In Argentina, the wheat harvest has been completed according to the Buenos Aires Grain Exchange (Bage). The preliminary harvest forecast stands at 21,8 million tons, which is 4,8 million more than last year. This is partly due to a growth in the acreage, but mainly due to a higher yield per hectare (22% above last year's yield). It is not surprising that buyers of wheat are watching developments in the southern hemisphere with interest due to good yields not only in Argentina but also, for example, in Australia. A significant decrease in the costs for bulk transport also plays an important role in this. The Baltic Dry Index, the benchmark for sea freight of dry bulk, peaked at 2021 points in October 5650. That has now fallen to 1764 points, a level that is close to the multi-year average. The fact that transport is more or less normally priced again can be seen from the purchasing behaviour. The Algerian state grain agency bought 600.000 tons of wheat through an international tender and reportedly passed France - which is logistically very favorable for transport to North Africa.
Cautious recovery
The moderate mood on the international futures exchanges is also noticeable on the spot quotes in, for example, Germany and France. They also showed a decline. What is easily overlooked in a number of analyses, is the relatively limited supply of good quality baking wheat. This is happening not only in Europe, but also in Australia. According to sources, due to rain just before and during the start of the harvest, a relatively large part of the harvest cannot be sold as baking wheat. The European export figures also give little reason to be gloomy. Based on customs data, the EU is a net exporter of 2021 million tonnes of grain so far in the 2022/14,5 season. By way of comparison: a year earlier, the counter for the same period was 8,8 million tons. It is therefore quite possible that the market reacted a bit too strongly and that the low point has been reached for the time being. That is already noticeable on the Matif today. At the time of writing this article, the wheat price stands at €264 per tonne, a cautious recovery of €0,50 from last week.