Wheat price above 200 euros, what does the feed price do?

Figures from Wageningen Economic Research show that the price of fattening pig chunks increased by €0,15 in July to €24,60 per 100 kilos. Sow feeds also rose in price. The price of piglet pellets, however, remained stable.

€25 is in sight
De compound feed price indicator foresees a strong increase in the coming months. With an expected increase of approximately 3%, the price of fattening pig chunks is on the way to a price of more than €25 per 100 kilos. The last time these levels were current was in 2014. The recent rising commodity prices are the reason for the (expected) price increases.

De wheat price on the Matif in Paris rose above €200 per tonne last week. These levels are also being achieved in the physical market, according to arable farmers. The price of EU feed wheat (Rotterdam) rose last week by €12 to €205 per tonne. About 1 month ago, trade was still being conducted for approximately €20 per tonne less. It signals the movement that wheat prices have made in recent times. Of course the drought in Northwestern Europe this is the reason.

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Still a lot of uncertainty
The question now is: where is the wheat market moving? Opinions on this differ widely in the market, which is logical given the uncertainty. Both in Europe and Russia there are concerns about yields and quality. The estimates show various results. The range for the European harvest of common wheat is 125 million to 130 million tons. In the market, the most negative scenario is currently priced in, analysts say. By way of comparison: in 2017 about 141,8 million tons were brought in.

If the harvest is not too bad, a price correction can take place. Not infrequently in one year, the price reaches its highest point in mid-July, when the uncertainty of the harvest is reaching a climax. There is also the influence from the United States (US). A good harvest is expected there. Especially now that the conditions in the main growing areas are favourable. This could put pressure on US wheat prices, which in turn could also slow down price developments in Europe.

Barley and corn up
In the wake of wheat, barley prices are also rising, which is also an important raw material for the compound feed industry. Corn prices are also rising. Here, too, 2 forces work against each other. For example, there are concerns about growth in Europe, while conditions in the US and Canada are favorable.

The soy price is less affected by the drought, because the main growing areas are outside Europe. Due to the tensions surrounding the trade war, the soy price (CBoT) in recent months to below $300 per tonne. However, in the meantime, the price has risen again to $320 per tonne. Now that the sanctions are on the table, there is more certainty in the market. This has caused a turning point. In addition, there is a lot of demand for soy worldwide, which means that closing stocks are about 10% lower.

2 scenarios
All in all, the wheat market is in uncertain waters, where both upward and downward price movements are possible. In a favorable scenario, the price of fattening pig chunks could possibly remain below €25 per tonne; in an unfavorable scenario, this limit will be exceeded in the coming months.The impact of the drought is clearly reflected in the price development.