To the left! To the right! The party hit by the Brabant duo Snollebollekes also applies to the international grain market. The price level moves from left (up) to right (down). The roof came off last week. On the futures market instead of in the marquee, that is. A hangover followed in the second half of the week, but the new week is being looked forward to with green numbers.
The Matif futures market opened for wheat with green numbers at €423 per tonne for September delivery. That is a quarter higher than Friday's close and therefore also the provisional high of Monday. The June contract for grain maize is turning red again, which has everything to do with the approaching expiration date.
The signs are also green on the American futures market CME in Chicago. Wheat opened at $11,81 per bushel for July delivery and up 1,73% by noon. Sowing corn and soy can finally go smoothly in the US, but the state of winter cereals remains poor in the country. Recent precipitation alleviates the situation somewhat, but does not bring any substantial improvement.
French wheat dried up
Today (May 23) new data will be released in the US on sowing rate and crop status. FranceAgriMer already announced new figures on cereals in France on Friday afternoon. Due to extreme heat and drought in the country, crop numbers have decreased. Just under three quarters of winter wheat is now rated as good, compared to 82% a week earlier. This helped the grain market not fall further on Monday, after a price drop of €17,50 last week. Rain is expected in France, but analysts believe it will not be enough to remedy the drought.
Meanwhile, the war in Ukraine also continues to create a strong undercurrent in the market. The grain sector is especially concerned about how to get the old crop out of the country before the new one arrives. The growing conditions are good, but the silos are far from empty. Large quantities of maize in particular have yet to be exported. This goes to Europe by rail and trucks, but at a much slower pace than with shipping across the Black Sea. The waiting times have increased from 20 to 45 to 50 days, partly because many loading facilities have been destroyed in recent months.
Big harvest, but no export
Russia also faces similar problems. All market agencies agree that the country is heading for an excellent grain harvest, but how it should leave the country is a big question mark. This usually takes place via the Sea of Azov and the Black Sea and partly via the Ukrainian port city of Odessa. Shipowners single-handedly opt not to send ships to Russia, which handicaps grain exports in the country.
With wheat prices well above €400 for both direct and long-term delivery, there is growing opposition that the markets in the US and Europe have been over-inflated by speculators. This is partly the reason why the price decline last week went so fast. The extent to which the current quotations can be justified is a matter of considerable dispute. Compared to maize and soy, the futures market for wheat is a relatively smaller market with fewer positions. When a relatively small group (speculators) buy or sell, the price can be influenced as a result. This makes this commodity sensitive to sharp price movements.
Hedging interesting
What does this mean for the arable farmer on the one hand and the livestock farmer on the other? It is undeniable that the prices are record high. Many arable farmers have already made the decision to sell some of their wheat between €350 and €400 in recent weeks. A price of €340 per tonne for September 2023 on the Matif is still €140 to €145 above the multi-year average. Even with the higher input costs, it is interesting to think about hedging at such a price level. It is even more difficult for livestock farmers who have to buy. Do you want to enter a sky-high market now or wait and trust on nerves of steel that the price will fall?
When rain falls in the EU in time, this can soften part of the harvest and thereby drive down prices at the local level. If it remains dry, the price does not shrink and the plus €400 level is really the bottom. This means that the price can still move in all directions, as the Snollebollekes sing about.