The 'danger from the east' that caused the grain market to peak sharply has clearly cooled down, causing the European wheat price to melt its foundations. The price on the Matif futures market is thus in a free fall. The wheat price is now €26 per tonne lower.
On Tuesday, January 25, the March contract on the Matif reached a high of €290,75 per tonne before entering a free fall. On Wednesday, February 2, the price was still €264,25 and today - Thursday, February 3 - the price has to drop again. At the end of the morning another €2,25 has been deducted from the price.
Competitive position
In the absence of new developments in Ukraine, the market sees no reason to set a higher price level. An important factor for this is the competitive position of European (French) wheat. During a latest tender by the Egyptian Gasc agency it turned out that wheat from the Black Sea region is the most competitive. It is not the first country along the Mediterranean where France has had to make significant concessions. Algeria is also increasingly shopping in Russia. Thanks to an adjustment of the quality requirements, the country has gained a foothold in North Africa.
Analysts have been reporting very little snow cover in the Black Sea region for several weeks. This was also mentioned in the latest Mars report. This potentially poses a risk of frost damage. In practice, rain mainly falls in these areas and much-needed moisture reserves are replenished. It is still very dry in the American growing areas. This includes areas where spring wheat is grown in the northern US and Canada.
Corn feels firmer
Yet it cannot really appeal to the market. Political sentiment predominates there. The American futures market has no choice but to follow the European trend. The price has since fallen from almost $300 per tonne to $277,60 on Wednesday. Corn prices on both sides of the Atlantic are still holding up, but reductions are also in order here. Drought in South America causes positive feelings to be slightly greater with maize than with wheat.
Despite a relatively significant price reduction in wheat, this does not mean that physical prices will suffer much. The European feed wheat price suddenly rose sharply to €297 at the end of January, but is likely to decline again. The farm price on the regional exchanges is still maintained above €270, but it will be difficult to maintain this in a declining futures market.
Consider wheat price for 2022
Where possible, importing countries are increasingly choosing to postpone purchases until the next harvest. This also has a negative impact on current price formation. It may also be interesting for arable farmers to take a look at the new harvest. Until recently, the European futures market was still trading above €250 per tonne for September delivery. A relatively high level looking at the multi-year average. In practice, prices are €10 to €15 below that, based on market reports. This already lays a foundation for the 2022 harvest.