Analysis Grains & Commodities
Wheat quotation bounces back after tough days
Wheat prices on the Matif and the CBoT took a beating this week. However, that changed in the last trading session. Concerns about a limited supply once again prevailed in the market, where previously worries about an impending recession weighed on prices.
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Choose the subscription that suits youThe September wheat contract closed yesterday on the Matif at €338,75 per tonne. That is a significant increase compared to the day before, with €13,75. On the CBoT, wheat closed about 2% higher compared to a day earlier. Corn and soy prices were also on the rise, but showed a less strong increase than wheat. The decline in these raw materials in the recent period was also less sharp than was the case with wheat.
Problems with the export of wheat from the Black Sea region have been bothering grain market players since the Russian attack on Ukraine at the end of February. The winter wheat harvest has been putting some pressure on prices for about three weeks now. This was topped by the moderate economic expectations. That pushed the grain price almost to pre-war levels. The price of wheat has fallen considerably and several analysts wonder whether the decline may have been too sharp. The US winter wheat harvest is over half way through and typically the seasonal trough in wheat prices is in early July. If this season follows normal patterns, experts say this would not be a bad time to secure at least some of the wheat.
Demand is growing faster than production
Still not much is known about the realized wheat yields. The FAO Agriculture Organization has revised the total grain yield for 2022 upwards to 2.792 million tons. This is 7 million tons more than expected in June, but still 0,6% less than what the harvest was last year. At the same time, consumption increased by 9,2 million tons to 2.797 million tons. Consumption is higher than production and that is usually a sign of a solid foundation in the market.
In Brazil, growers have sown the largest area of wheat in 32 years. According to a survey by Conab, the Brazilian statistical agency, the wheat area is 9 million hectares. Concerns about drought are increasing in the US. The wheat area in Argentina has again been adjusted downwards by the Buenos Aires grain exchange. It is expected that 6,3 million wheat will be sown. That is 100.000 hectares less than last month's forecast and already the fourth month in which the forecast has to be adjusted downwards. This is hardly a problem anymore for winter wheat, but it is for spring wheat and especially corn and soy.
