European wheat is in the spotlight. While analysts assumed that extending the grain deal would push European prices down, this is not so bad in practice. Wheat from the EU is competitive on the world market, and the supply of wheat from Russia and Ukraine has little to do with that. Child of the bill seems to be the American wheat.
The wheat price took another step up on the Matif yesterday. The December contract closed €2,75 higher at €333,50 per tonne. On the CBoT, wheat suffered a slight decline and was 1% lower at $7.91½ per bushel (approximately €282 per tonne). Corn and soy also closed lower in Chicago, down 0,4% and 0,5%, respectively. Europe benefits from increased demand and is therefore hardly affected by the extension of the grain deal with Russia and Ukraine. Good demand in the EU is at the expense of demand in the US.
The European wheat quotation is supported by good demand on the world market. Reuters reports, citing anonymous traders, that China has purchased seven or eight shiploads of Panamax class wheat. That amounts to 400.000 to 500.000 tons. In addition, ten shiploads have been reserved with a total volume of somewhere between 600.000 and 700.000 tons. It is expected that these ships will be loaded in December. The Chinese demand for wheat is relatively high because the import quota for this calendar year has yet to be filled. Normally, China purchases extra wheat from Australia in December, where the harvest has started. Due to the rainfall and flooding in Australia, there are doubts about the harvest progress there and the quality of the wheat. Prices on the domestic Chinese market are at a high level and that makes doing business a little easier for Chinese buyers.
European wheat has the advantage
It is more common for China to be active on the European grain market. What's more remarkable is that buyers from the US are now also emerging. Traders say U.S. millers have bought 100.000 tons of wheat in Poland, Reuters reports. There would also be interest in German wheat. Price is the main reason for Americans to buy wheat in the EU. For delivery to the American east coast, European wheat, including unloading in the port, would be approximately $50 to $75 cheaper, even 'hard red winter wheat' from the US. The wheat from Poland would cost a buyer in Florida $360 to $370 per ton c&f (carried out). In the US, grain transport is being hampered by low water levels in the Mississippi and grain market players are concerned about a railroad strike. Prices for bulk sea freight have fallen sharply in recent months.
Not only is China active in the European wheat market, interest in corn from Brazil is also increasing. Both countries agreed on a new trade protocol earlier this year that will come into effect in 2023. Brazil could export 40 to 50 million tons of corn according to Sergio Mendes, director of Anec, due to the agreement with China and a potentially good harvest. By comparison, Brazil exported 2021 million tons of corn in 20,6.
View the overview of grain prices and the technical analysis here.