Even higher production figures have little effect on wheat prices on the futures markets. The figures in the Wasde report were slightly higher than expected, but trading saw little to no reaction.
The market calmly accepted the new figures yesterday. The effect on prices was negligible. The most traded March contract fell by the smallest possible margin (a quarter of a cent) to $5,34½ per bushel. This contract closed at the equivalent of €169 per tonne, bringing the price level down about €2 per tonne compared to last week.
Yesterday's developments indicate that the market is saturated and that higher production expectations have already been factored into pricing. A further increase in expected global stocks also didn't change traders' resigned attitude. A contributing factor may be that the US wheat figures showed no difference compared to last month.
Paris also saw a slight price drop yesterday. The Wasde figures had no impact, as the report was released after the close of trading. The most traded March contract fell by €0,50 yesterday to €190,25 per tonne. This leaves the futures market price just above €190 per tonne. At the end of November, the March contract briefly dropped to €188 per tonne, but otherwise the closing price has been firmly stuck at a level very close to €190 per tonne since mid-November.
Local markets in the Netherlands are currently serenely calm. Factories have covered their raw material needs for this year and therefore don't need to enter the market for a while. This has resulted in a very calm wheat market here, with prices expected to stabilize heading into the New Year.
Argentine export duties down
Besides the high production figures, Argentina's decision to lower export duties on grain is also hampering pricing in the wheat market. The duty on wheat and barley will decrease from 9,5% to 7,5%. This reduction will boost wheat exports. Wheat growers in that country could certainly use this support, as they are enjoying a record harvest.
The Wasde report shows an increase in Argentina's wheat production from 2 million tons to 24 million tons compared to last month's estimate. Last season, Argentina harvested 18,5 million tons, while the previous year it was just under 16 million tons. These differences are significant, and therefore the country has a significantly larger quantity available for export this season.
According to Wasde, exports will increase to 14,5 million tons this season. Domestic consumption will also rise to just under 8 million tons. Wasde predicts that animal feed sales will more than double to around 800.000 tons. This means that animal feed plays a limited role in Argentina's wheat consumption. In the European Union, 50 million tons of the total 114,5 million tons consumed end up in the mouths of animals.