Egypt raises wheat price to build up stocks

The May wheat contract on the Matif closed €1,25 higher yesterday at €202,50 per ton. On the CBoT, wheat also recorded a modest gain of ¾ cent to $5.98¼ per bushel. Maize closed 2 cents lower at $4.52¼ per bushel. Soybeans lost 5 cents, coming in at $11.63½ per bushel.

The capriciousness of US President Donald Trump remains a major factor in the grain market. His speech earlier this week dashed hopes for a quick end to the war. This was particularly evident in the prices for oil and fuel.

Today is Good Friday, and European and American stock exchanges are largely closed. On Easter Monday, Chicago is open, but Paris and London are closed. According to analysts, the long weekend presents a trading dilemma. A lot can change in a few days, and traders and speculators do not want to hold heavy long positions (buying contracts in the expectation that they will rise). Trump could, of course, simply announce that there is a deal with Iran. Due to the trading wait-and-see attitude, grains did not entirely follow the movement seen in oil.

One-third of the wheat in the drought zone 
Developments in the Middle East are receiving a great deal of attention, but drought in the US is gradually becoming an increasingly significant problem for American farmers as well. With the exception of North Dakota, a large portion of the US Wheat Belt is now marked on the latest drought monitor. Last week, 57% of US winter wheat was affected by drought. This week, that figure has risen to 65% of the acreage. In the Corn Belt, the problems are less severe, yet 44% of the area where corn is grown is still facing drought. Of course, the corn still largely needs to be sown. Cotton, which is sown primarily in the southern US, is perhaps the most extreme example, with 94% of the acreage in a drought zone.

Egypt is raising the intervention price for wheat to 2.500 Egyptian pounds per ardeb (150 kilos) (approximately €267 per ton). The price stood at 2.250 to 2.350 Egyptian pounds per ardeb, according to Reuters. The wheat harvest starts in Egypt in about two weeks, and with the higher price, Egypt aims to increase its strategic wheat reserves. The country is doing this amidst the height of the war in Iran. The strategic reserves of wheat, vegetable oils, maize, oil, and gas are sufficient to cover six months of consumption, Egyptian Prime Minister Mostafa Madbouly stated at a press conference. The Egyptian government is building up an additional two to three months' worth of stock. Egypt intends to purchase 5 million tons of domestically grown wheat this season and has the ambition to transform from the world's largest wheat importer into self-sufficient. Egypt, with approximately 70 million inhabitants, typically imports around 10 million tons of wheat.

Costs are rising
In Australia, concerns about high fertilizer prices and expensive diesel continue to mount. Urea now costs approximately AU$1.350 per ton (approximately €807 per ton). This means the price of this nitrogen fertilizer has risen by about 60% since the start of the war in Iran. The price of diesel has risen by 88% over the same period. This is having consequences for the cropping plan of American farmers. Nitrogen-demanding crops such as wheat and rapeseed are being replaced by crops that require less nitrogen. "Farmers are trying to reduce fertilizer use and are switching from nitrogen-demanding crops like wheat and rapeseed to feed barley," Dennis Voznesenski, an analyst at Commonwealth Bank of Australia, told Reuters. "Some are also reducing the planted area, but this has been minimal so far," he added.

According to some analysts, the wheat acreage in Australia could turn out 10% to 12% smaller this season due to current market conditions. Last year, 12,4 million hectares of wheat were cultivated. Australia is the fourth-largest exporter of wheat on the world market and the second-largest exporter of rapeseed.