In a week, the European wheat price fell by €15,50 per tonne to the lowest level since the end of February. Under pressure from the grain harvest, the international stock exchanges have to loosen the reins. This ensures that buyers present themselves in Europe. The price level is now stabilizing.
The Matif opened €3,75 higher per tonne on Monday morning for wheat September delivery. On Monday afternoon the price rose to a level of €340. This means that the price is still ten euros or more below that of last week. It is clear that the grain harvest in Europe - but also the United States - is putting pressure on the market. Not much is known yet about the yield and quality, but threshing is going smoothly this season thanks to favorable weather.
Egypt on the market
Last week Egypt already had a big one order for European wheat of French origin. The purchase of 815.000 tons is the largest in years. With the emergence of cheap and large volumes of Russian wheat, the country was increasingly bypassed. Other North African countries also showed this behavior. Egypt also bought wheat from the United States for the first time since 2019.
The Egyptian state agency GASC is not standing still. Despite recent purchases, it remains actively looking for wheat for the coming season. This time not through a public tender, but through private means, as was announced today by the Reuters news agency. At the same time, the country says it has ample supplies of wheat. According to analysts, now is the time for a new buying round, as appears to be the case.
Does Russian wheat reach its destination?
Russia has the potential to export 40 million tons of wheat in the 2022-2023 season, which started last Friday. That is 1 million tons more than in the last season. Last season, almost all wheat could be exported, despite the war in Ukraine. Whether that will also be the case this season remains to be seen. The country exports a lot of wheat via the Sea of Azov and Black Sea. Destinations that are currently difficult or impossible to reach. This is especially true for Ukraine, where the export level in June was 44% lower than a year earlier.
Paying for loads of Russian wheat is also sometimes a problem. Not all shipowners are looking forward to a trip to Russia. Even though agricultural products such as wheat are not affected by sanctions, there are still consequences. The analyzes for the volume to be exported therefore fluctuate considerably, between 32 and 42 million tons. Russia announced this weekend that grain exporters must be paid export taxes in rubles and not dollars. This does not apply to the product itself. It is a sign that this export is also being closely monitored.
Downward trend until the end of August
In the US, wheat prices last Friday reached price levels not seen since the war. The wheat harvest is going particularly smoothly in the country. Today the CME in Chicago is closed for Independence Day. Harvest progress and rainfall should give the market direction on Tuesday.
History shows that the grain price always falls during this period. A revival is possible at the end of August, when it is clear how much has been harvested and of what quality. That gives the market definitive direction. We are now dealing with a special global market, which has two major uncertain factors. The situation in Ukraine and, by extension, Black Sea exports. If something changes here, it will have irrevocable consequences for price formation. Both positive and negative.