The wheat price on the Matif for September 2023 delivery must again admit euros on Monday afternoon, June 27, with prices even below €350 on the plates in Paris. It is becoming increasingly clear that the grain harvest is smaller than last year, but this cannot change the market. In this article you can read which current events have the greatest influence.
A falling wheat price - which already made a big leap last week - is also causing countries to present themselves as buyers. For example, Egypt has announced that it will buy 180.000 tons of wheat from India. That is considerably less than the half a million tons it talked about earlier. The Egyptian minister for food supplies himself says that the country has sufficient grain supplies for almost six months of production. According to analysts, such statements are a sign that the country is likely to launch a tender for wheat soon.
Smaller harvest has no effect
Drought and heat in Europe mean that grain yields will be lower than in 2021. The multi-year level will also not be achieved, including in Germany. The wheat market has little interest in this today. Internationally, more attention is paid to the progress of the harvest in the United States, where high temperatures ensure a smooth progress.
Expected precipitation in the American Midwest causes prices to correct. This is especially the case for corn. The rain falls at just the right time. This is not the case in all states and it can also be very warm this week. Next Thursday, the USDA will publish its quarterly report containing estimated grain stocks and acreage, which will certainly provide direction to the market. Because it is Monday, July 4, the CME in Chicago closes its doors on this day. The market's reaction is therefore expected on Thursday - after publication of the report - and Friday.
Logistics is the problem
In Russia, Ukraine and Romania, combine harvesters roll across the land. Especially to harvest winter barley. Logistically, the shoe pinches the most. Nevertheless, the price is influenced by the persistent reports that the Russian harvest is large this year. How and whether all this volume can be sold is of secondary importance.
The inaccessibility of Ukrainian seaports places greater pressure on the Black Sea port of Constanta in Romania. The location has already processed a record amount of grain this season - Romania had a good harvest last year - and there is an additional volume from Ukraine. The country is doing everything it can to get its infrastructure in order, but that will not be solved in a few months. Many kilometers of railway lines have been rusting away since Soviet times.
Posts about theft of Ukrainian grain by the Russian occupier continues to dominate the news headlines, although the effect on the market is minimal. In any case, it shows that countries such as Syria and Turkey have no problem purchasing (stolen) grain from Russia.
Thinking about the long term
A price level above €350 per tonne for wheat is still very high from a historical perspective. The inflated market of recent weeks has clearly slowed down and the question now is where the bottom lies. It is a good time to think about the longer-term strategy. On the Matif, the December contract is trading below €350 today and the one for September 2023 is still slightly above €300. These are excellent prices compared to the average. Hedging as an arable farmer can also be interesting in this market.