It remains doom and gloom on the wheat market. While unrest in the Black Sea region pushed prices to record levels two years ago, exporters from Russia and Ukraine are now causing price pressure. Some analysts see signs that the wheat market is at a turning point. For the time being, this is not reflected in the futures markets. The spread between old and new harvest ensures special developments on the physical market.
The March wheat contract on the Matif closed yesterday €0,50 higher at €184 per tonne. The May contract, which sees the most trading, closed €1,75 lower at €188,50 per tonne. The March wheat contract on the CBoT lost 4,5% last trading session to settle at $5.21¼ per bushel. Soybean, as is almost customary in recent days, moved sideways, closing half a cent lower at $11.40¼ a bushel. Corn showed a plus of 1% to $4.18 per bushel.
Two years ago, shortly after the Russian invasion, wheat prices rose to record highs. There is nothing left of the tension that gripped the market at that time. Some analysts are already talking about the bottomless pit of wheat. And now the Black Sea region is the culprit according to experts. Ukraine is reportedly offering wheat at just over $190 per tonne FOB (ship delivered). Russian exporters have fallen just below $200. On the CBoT yesterday, wheat fell to the lowest level since August 2020. This does not immediately make analysts nervous. Last week, prices for corn and soy also dipped to the lowest point since the end of 2020. It is not entirely surprising that wheat is now following suit.
Tight stock
The stock numbers don't exactly reflect the strong bearish undertone in the market. Participants in a Bloomberg poll expect the USDA to cut world ending stocks of corn, soy and wheat in the Wasde report next Friday. The ending corn stock is estimated at 320,9 million tons in the survey, a decrease of 1,2 million tons compared to the February edition of the Wasde. Soy amounts to 114,7 million tons, a decrease of 1,3 million tons, and wheat 259,2 million tons, which is 0,3 million tons less. This is the fourth season in a row that the stock has fallen. The closing stock of wheat is the smallest in eight years. If we take out the Chinese stock figures (there are some doubts about the reliability of those figures), we even have the smallest wheat stock in eleven years. Looking at the inventory/consumption ratio, we could be on the verge of a new rally in the wheat market.
Old harvest is bought up
Some traders see current physical grain prices as too low. Some sources report that wheat from the old harvest is being bought while wheat from the new harvest is being sold by German and French grain traders. Growers are in no hurry to sell the remainder of the 2023 harvest. Players on the futures market pay little attention to these reports.
Algeria has bought more wheat in an international tender than analysts expected. The state buyer OAIC has secured between 870.000 and 900.000 wheat, it was announced yesterday. The price would be between $227 and $228 per tonne C&F (free). Reportedly, almost all of the wheat comes from the Black Sea region. China is abandoning a wheat order it placed in the US. These are rumors that have not been confirmed by official sources.