Analysis Grains & Commodities
Historically high prices in commodity markets
A historic Friday (March 4) after a turbulent week in the wheat market. For the first time, the Matif rose above €400 per tonne in Paris, fueled by the uncertainty and sentiment brought about by the war in Ukraine. How did commodities close in Europe this week?
The March wheat contract on the Matif opened on Friday at €400 per tonne. During the day, it even rose to $426 per tonne at its peak and the price was above $410 for much of the day. After five, a sales frenzy hit and the price fell again, even briefly dropping below €380 per tonne. By closing time, the market bounced back to close at €393,75 per tonne. But the expiration date of the March contract is approaching and many parties have already reduced their positions. The May contract is therefore the most traded contract and it also passed the €400 mark with €406,75 at its highest point. The May contract was closed at €374,75 per tonne, a gain of 2,3% compared to yesterday's closing price. With the expiry of the March contract, the price difference between March and May must be reduced. Is March too high or May too low? That question will be answered in the coming trading days.
New harvest stuck above €300
The first contracts for the new harvest are again above €300 per tonne. The September contract stands at €317,50 per tonne. That is 1,5% higher than yesterday. The December contract rose even faster by 2,9% to 309,25 per tonne. March 2023 is now also above €300 at €303,50 per tonne. The market therefore calculates that the supply of wheat from the Black Sea area may be disrupted for a longer period of time. Only before the 2023 harvest will the price drop to a more usual level of around €250. Compared to two weeks ago, by the way, still €25 higher.
The corn quotation on the Matif rose through the roof on Friday, just like wheat. The stock market opened at €420 per tonne, which is the highest price of the day. While the March and May contracts still have to move towards each other on the wheat market, that happened today (Friday) with maize. The March contract closed at €350 per tonne - down 7,7% and May closed at €345 per tonne. That is an increase of 5,3%. The November contract (first contract new crop) closed 268,50% lower at €0,3 per tonne.
Potato market excels in stability
Between all the spectacle on the grain market, for example, the potato futures market is out of place. Throughout the week, the April 2022 contract moves between €19 and €20 per 100 kilos to close on Friday at €19,80 per 100 kilos. The June contract has been concluded at €21 per 100 kilos. The new crop is closed at €19,40 for the April 2023 contract. With the high wheat and to a slightly lesser extent maize prices, the grower has an alternative to potato cultivation. What does that mean for the potato area for the coming season?
The grain market, as well as the gas and oil market, have taken very significant steps in the past week. The main cause is, of course, the disruptive effect on world trade of the war in Ukraine. However, trading is not based solely on the cool facts. Other motives and emotions always play a role. Several experts warn that this has also pumped a lot of air into the market in recent days. Ukraine and Russia are both agrarian superpowers that are particularly essential for the food supply of North Africa and the Middle East. And however you get used to it, major problems have arisen in the past week. In that sense, something fundamental has changed in the markets.
Jurphaas Lugtenburg
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