Wheat prices have lost a lot of ground in recent weeks. As fast as the war in Ukraine caused the grain market to rise, so fast are the prices now falling. What is the cause of this and how quickly do feed prices follow?
To start with feed prices: the falling raw material prices are not yet making themselves felt. In June, the price of pork chunks rose for the tenth consecutive month, this time by more than €10 to €429 per tonne. In the same order of magnitude, the price of cattle chunks (A-brok) rose to €393 per tonne, according to figures from Wageningen Economic Research. The other feeds also continued to make progress last month. It is no longer news that records have been broken again.
Yet a change is imminent. The wheat price has been showing a downward trend since mid-May. The price on the Matif fell particularly quickly over the past two weeks. Meanwhile, wheat in Paris is trading at around €330 per tonne, which is around €100 lower than in mid-May when the price set a new record. Physical trade flows have also been significantly depreciated.
Raw materials market bullishnot bearish
The cause of this is of various kinds. In general terms it can be said that the trend in the commodity markets bearish is. Prices are falling, from palm oil to coffee to rice. Just like the stock prices, by the way. Wheat also participates in this. Rising interest rates play a role in this, as do concerns about an impending recession due to sky-high inflation. Internal market factors also put pressure on the wheat price. Consider rain in the Midwest of the United States, which is favorable for yield expectations. Yet it is mainly poor economic prospects that are causing the wheat price to tumble. The war in eastern Ukraine continues in all its intensity, but this has not stopped the downward trend.
Wheat drives chunk prices
Wheat is an important component in many pellet compositions and also determines other raw materials such as barley. The question that now (rightly) arises is: when will feed prices fall? A rule of thumb is that bulk prices respond to raw material prices with a delay of two to three months. In June we still saw rising prices, as reported above. However, this trend seems to be changing quickly.
The compound feed price indicator predicts a leveling off price picture for July, which will turn into price declines in August, both for pigs as the cattle feed. It is possible that compound feed companies will maintain prices for a while longer in order to correct their margins, which came under pressure this spring when raw material prices rose rapidly. Within a few months, feed prices will fall again, unless the raw materials markets take off again.