Wheat prices came under significant pressure on the futures markets in the last trading session. The pressure of possible additional supply on the global market weighed heavily on traders and speculators. On the physical market, the wheat price is still holding up well, according to the results of an Egyptian tender.
The March wheat contract on the Matif fell to €290,50 per tonne yesterday. That is €6 lower compared to the closing price the day before. The wheat quotation also made a big splash on the CBoT. In Chicago, the current wheat contract fell 1,4% to $7,31 per bushel. Corn closed 0,3% higher on the CBoT. The January soy contract on the CBoT, which is almost out, added 0,4% last trading session, but the other contracts closed marginally lower.
Relatively little demand for wheat from the US, a strong dollar and stiff competition on the world market put wheat's quotation on the CBoT under pressure, according to several analysts. In particular, the news that India is probably heading for a record harvest weighed heavily on wheat prices. This increases the chance that India will lift the export ban on wheat and that would provide additional relief to the wheat market. Furthermore, the relatively limited turnover and open positions on the futures markets also play a role. Prices are therefore slightly more sensitive to price shocks, according to some experts.
Stabilization on the physical market
Analysts often point to the wide availability of relatively cheap wheat from the Black Sea region for the price pressure on the wheat market. The bottom in the market now appears to have been reached. Since the end of December, the price for wheat has remained stable at $306 for FOB delivery, according to market agency IKAR. Sovecon warns of frost damage in winter wheat in southern and central Russia. The mercury there drops below minus 15 degrees and the wheat barely has a protective blanket of snow. "If it remains colder for a few days and the soil temperature falls below minus 15 degrees, the wheat will winter out," according to Sovecon analysts. The results of an Egyptian tender were announced yesterday. The lowest tender is reportedly an offer of $337 per tonne C&F (free) of 60.000 tonnes of wheat from Russia. That price is only a few dollars lower than the previous tender from the Egyptian state purchasing agency GASC. The highest bid in the tender was for wheat from France at $351,82 per tonne.
China is in the market for corn from Brazil. This was announced by Anec, a trade association of Brazilian grain traders. In January, space was booked for the transshipment of 1 million tons of corn in Brazilian ports by Chinese buyers. The total corn export for the month of January therefore amounts to 5,024 million tons. Last week, Anec expected an export of 4,326 million tons. Chinese buying in Brazil is likely to lead to lower corn exports from the US, experts warn. Japan's meteorological agency estimates there is a 70% chance that the La Niña weather phenomenon will end at the end of winter in the Northern Hemisphere. There is an 80% chance that weather patterns will return to normal next spring, the Japanese agency said. The weather phenomenon La Niña is associated with relatively low water temperatures in the Pacific Ocean and usually causes drought in parts of South America and extra precipitation in Australia. The change will come too late for the upcoming harvest in Argentina, says the Buenos Aires grain exchange. Drought has halved wheat yields and delayed sowing of corn and soy.