Supply is key in the wheat market. An ample supply of wheat from Russia has been depressing the wheat price in recent months. This is changing now that the Kremlin is reducing export quotas. A good starting position for wheat in Australia, the US and Europe is limiting the room for growth in the wheat market. This is different in India, where the wheat price on the domestic market reached a new record.
The December wheat contract on the Matif closed yesterday €0,75 higher at €212,25 per tonne. On the CBoT, wheat closed 0,1% lower at $5.36¾ per bushel. Corn lost 0,3% to $4.23¼ per bushel. Soybeans, in contrast to grains, showed a small gain and closed 0,7% higher at $9.91¾ per bushel.
The room for manoeuvre on the wheat market is limited. Russia has reduced its wheat export quota in the second half of the season. Reasonably, this would tighten the supply of wheat on the world market. This limits the room for falling wheat prices. Incidentally, the Ikar quotation for Russian wheat remained the same this week at $226 per bushel.
Russian wheat is not looking very prosperous for the coming harvest. 37% is rated bad and that is the worst state of winter wheat in ten years. The crop is sensitive to frost damage due to the moderate state, according to various sources. Severe frost is not yet such a problem in Russia.
European exporters are not yet seeing much of the export restrictions the Kremlin is working on. So far this season, 9,48 million tons of wheat have been exported, compared to 13,75 million tons a year earlier.
Good starting position for winter wheat in the US
The southern prairies in the US are getting colder, but not so cold that wintering out of wheat becomes a problem. More importantly, there has been quite a bit of rain in the American wheat belt in recent weeks. The condition of the wheat has improved considerably as a result. In the largest wheat state, Kansas, 56% of the winter wheat is in good or excellent condition according to the USDA. Last week that was 55% and last year this week 40% of the wheat was in good condition. As in Europe, the starting position for wheat for the coming harvest is relatively good.
Another price-depressing factor is the expected wheat harvest in Australia. According to Abares, this is 31,9% above the 20-year average at 10 million tonnes. The combines are in operation in Australia and exporters should be able to compensate for part of the loss of supply from Russia due to the good harvest.
Record price
In India, the season is less favourable for grain growers. Due to relatively warm weather, concerns are growing about the potential yield of wheat and rapeseed. These crops are sown in India from October to December and need moderate temperatures for good yields. The wheat price in India reached a record of 32.000 rupees per tonne (around €360 per tonne) last week. Importing extra wheat would be an option to lower the wheat price on the domestic market. However, this is met with a lot of resistance from farmers. In order to do something about the high prices, India is bringing wheat from the intervention stock onto the market. However, this stock needs to be replenished at some point and a moderate harvest does not help.
In Brazil, soybean growers are ahead of schedule with sowing. Of the planned area, 91% is in the ground, according to AgRural. That is the highest percentage sown for this week since 2018. In the vast majority of Brazil, the starting position for soy is good, AgRural notes. Only in the province of Rio Grande do Sul is sowing a bit behind and the soy that is in the ground is at a standstill due to a lack of moisture.