Wheat prices crept higher in the last trading session. Fundamentally, not much has changed in the market, but the mood is shifting a bit according to some analysts. The poor start of winter wheat in the US also remains a concern.
The December wheat contract on the Matif rose €0,50 yesterday to close at €326 per tonne. Also on the CboT, wheat closed higher by 0,1% at $7,57¾ per bushel. Corn closed marginally lower on the American stock exchange, while soy showed a cautious plus of 0,2%. The December contracts are heading towards their expiration date. It is therefore interesting to look at the March quotations. It is striking that on the CBoT the March wheat contract is significantly higher than the current contract at $7,81½ per bushel, while on the Matif the March contract is considerably lower than the current contract at €312,75. As the last trading day approaches (December 10 on the Matif and December 15 on the CBoT), it becomes more exciting how the contracts converge. You can reasonably expect the gap between American and European wheat to shrink in the coming weeks.
The fact that wheat prices have taken a marginal step up is attributed by several analysts to a cautious relaxation of the very strict corona policy in China. It is expected that the government will want to accommodate the population somewhat after the exceptional protests. The demand for grains may therefore hold up better, as analysts assumed earlier this week. Despite the problems and risks surrounding exports, wheat from the Black Sea region remains an interesting price option for buyers. This was once again underlined this week with orders from the Egyptian state buyer GASC and the Turkish TMO for wheat from the Black Sea region. American exporters in particular face stiff competition from the Russians and Ukrainians.
Drought puts wheat at a disadvantage
The winter wheat in the US for the coming harvest is not yet picking up and remains moderate. The condition has been slightly adjusted in the USDA's Crop Progress report. 34% of the area receives good or excellent status. Last week that percentage was 32%. The current winter wheat condition is therefore the worst condition of the crop since 2012. About three-quarters of the American winter wheat area is suffering from drought. Of the total agricultural land in the US, 50% has a deficiency or major deficiency of moisture in the growing layer. Last week that percentage was 53% according to the USDA.
A large wheat harvest is predicted for India in 2023. Last year yields were disappointing due to extreme heat and drought. As a result, India earlier this year returned to the export ambitions that the government announced after the Russian invasion of Ukraine. High prices on the local market and sufficient moisture have prompted Indian farmers to sow significantly more wheat. This expansion is mainly at the expense of the area of legumes and oilseeds. As of October 1, 15,3 million hectares of wheat had been sown in India, an 11% increase in area compared to last season, according to provisional data from the country's Ministry of Agriculture. India has been a bit of a sleeping giant in the wheat market so far. The country sometimes has a surplus of wheat, but often has difficulty exporting due to the poor quality. The Indian government is trying to change this. India is a party to seriously take into account. After China and the EU, India is the country with the largest wheat production in the world, according to USDA figures. Besides, India also has a huge domestic demand.
View the overview of grain prices and the technical analysis here.