After two days of record wheat and maize prices, the grain market has taken a breather. The bulls that drive the market up have to be continuously updated with news to justify an even higher price. At the moment, the world is mainly concerned about the export of Ukrainian grain.
After two closing prices of €438,25 per tonne for the September 2022 contract, the Matif closed at €430,50 on Wednesday. The CBoT also turned a corner and lost more than $18 on the July contract. The price of corn also lost more than $7,50. In Paris, the decline in corn prices was limited by €2,50 to €371 per tonne.
The Crop Progress report in the United States, published on Monday by the USDA Agriculture Ministry, mainly supported the wheat market. The condition of winter grains is deteriorating due to severe drought in the southern US. More than a quarter of the winter wheat is in good condition. That is the worst crop condition in eight years. The sowing of corn and soy has made good progress, but is still lagging behind.
Hunger as a weapon
Global politicians – and also the grain world – are very concerned about the export of grains from Ukraine. There are still many full silos in the country, while the new harvest will arrive in about six to eight weeks. The UN met yesterday on this subject. German Foreign Minister Annalena Baerbock says that Russia uses hunger as a weapon of war, because exports are blocked. Countries in Africa and the Middle East in particular are threatened with hunger.
The UN calls countries to work together to combat hunger. 276 million people have an unstable food supply and half a million people go hungry. In addition to the closed Ukrainian ports, these problems also partly apply to Russia, which also exports grains and other raw materials such as fertilizer via the Black Sea.
Moroccan harvest 70% smaller
Many African countries have to look elsewhere for wheat now that Ukrainian production has halved and Russian production - which expects a very good harvest - cannot easily enter the world market. India tried to respond to this, but an export ban has put its position in jeopardy. Local harvests are also under pressure Morocco announced this week that the wheat harvest will decline 70% this year. That is the smallest harvest since 2008. Drought is the cause of this.
Drought is also becoming increasingly heard in Europe. It is partly responsible for the recent price increase. Showers spreading in Western Europe this week are dampening sentiment. The further course of the race is therefore determined by the weather. It remains warm for this time of year. Dry weather is expected again in the medium term, making recovery short-lived.
Wheat hedged at €400
Many arable farmers have taken the opportunity in recent days and weeks to fix prices for the coming season. For various buyers, prices could be quoted at or around €400 per ton for harvest delivery. At a rate of €359 per tonne, the September 2023 contract on the Matif also offers good hedging opportunities. This lays an important foundation for the 2022/2023 cultivation season, where higher cultivation costs will probably have to be expected compared to the current season.