The days of wheat prices of €300 or more are long gone. In fact, simply removing direct costs from the market is already a major challenge. This puts a brake on trade, especially in the more extensive arable farming regions.
The September wheat contract on the Matif closed yesterday down €3 at €189,50 per tonne. On the CBoT, wheat rose 8 cents in the last trading session to $5.10¼ per bushel. Corn also gained, but the increase was limited to 3 cents at $3.85½ per bushel. Soybeans moved more sideways, closing 1 cent higher at $10.28¼ per bushel.
The signals on the grain market are somewhat contradictory. On the one hand, there are reports of ample wheat availability and relatively large wheat stocks hanging over the market, but prices are barely responding. Incidentally, the European Commission lowered the EU grain harvest estimate by 1,5 million tons to 276,9 million tons. This reduction is primarily due to maize. The maize harvest estimate has been lowered from 60,1 million tons in July to 57,6 million tons this month. The wheat harvest estimate has been increased slightly, from 127,3 million tons to 128,1 million tons.
Price spiral
Buyers see such figures and think: we'll wait and see, maybe the price can drop a bit further. However, among grain growers, especially in the more extensive arable regions of Europe, the mood seems to be shifting somewhat. Prices have now fallen below cost price. Selling wheat now at a price that you know you'll have to pay for is still unreasonable for several growers at this stage of the season. Because sellers are so cautious, that inventory remains above the market, and buyers keep pointing to the large stocks. This downward spiral is proving difficult to break.
A report that France has harvested approximately 33,4 million tons of wheat, 30% more than last year, is hardly boosting sentiment. Several analysts do expect French wheat exports to perform much better than last season, when there was less wheat to sell after a truly poor growing season. Nevertheless, France could well end this season with the largest final wheat stock in about twenty years.
Incidentally, a lackluster export performance isn't a problem unique to Europe. Ukraine exported 2,26 million tons of wheat this season. Last year, the figure for the same period was 3,39 million tons.
Estimate
Stats Canada released its wheat harvest estimate yesterday. At 35,55 million tons, the final estimate was slightly lower than expected by the trade sector. The average in the Bloomberg survey was 35,6 million tons. According to Stats Canada, the Canadian wheat harvest is therefore 1,1% lower than last season. The canola harvest is estimated at 19,9 million tons, up 3,6% from last season. Participants in the Bloomberg survey had expected 20,1 million tons of canola.