Recent Market Trends
Stock market quotations for wheat have seen a notable decline following forecasts of a good wheat harvest in the USA and the EU. After a speculative increase of 15-20% due to frosts in Russia, this week saw wheat quotes fall by 2.5-4.2%. The drop is attributed to improved crop forecasts in the EU and the US, aided by heavy rains, and profit-taking by traders.
Russian Wheat Production Challenges
The Russian Federation authorities announced an increase in the replanting area from 500,000 to 830,000 hectares of spring crops, constituting 1% of the total planted area in the country. Unfavorable weather conditions in central and southern regions have prompted the SovEkon agency to lower its forecast for Russian wheat production in 2024 by 7.3 million tons, bringing it to 85.7 million tons. This projection is 1 million tons less than the average over the past five years.
Positive Outlook in the USA and EU
Traders are shifting their focus from Russia to the weather conditions in the USA and Europe, particularly in the Black Sea region, where crop development is favorable.
EU Production Forecasts
Strategie Grains has increased its forecast for EU soft wheat production in the 2024/25 fiscal year from 121.8 million to 123.5 million tonnes, mainly due to an anticipated larger harvest in Spain. However, this figure is still below the 126.1 million tonnes harvested in the 2023/24 fiscal year. Meanwhile, the forecast for corn harvest in the EU has been slightly reduced from 63.4 million to 63.3 million tonnes, surpassing last year’s 62.4 million tonnes.
US Wheat Yield Projections
The Kansas Crop Tour has revealed that the average yield of Hard Red Winter (HRW) wheat could reach 3.13 t/ha, compared to 2.02 t/ha last year and the 5-year average of 2.85 t/ha. Total wheat production in Kansas is expected to reach 7.9 million tons, exceeding the USDA’s May forecast by 8.4%.
Futures Market Movements
On July futures for the new wheat harvest, prices showed modest increases:
- Soft Winter SRW Wheat in Chicago: Up by 0.4% to $243.7/t, but down 3.5% from Monday.
- HRW Hard Winter Wheat in Kansas City: Up by 0.3% to $247.4/t, but down 4%.
- Hard Spring HRS Wheat in Minneapolis: Up by 0.9% to $264.8/t, but down 2.5%.
- September Wheat Futures on the Paris Euronext: Up by 0.9% to €248.5/t or $270/t, but down 4.2%.
Weather Impact on Future Harvests
Precipitation is forecasted for the coming days in the southeast of Ukraine and the south of the Russian Federation, which is expected to improve the condition of wheat crops and the overall harvest prospects.
Factors Influencing Future Wheat Prices
Several factors will play a crucial role in determining whether wheat prices will rise, remain stable, or fall in the near future:
- Weather Conditions: Favorable weather in key growing regions like the USA, EU, and Black Sea region can boost crop yields and stabilize prices.
- Crop Forecasts: Continued improvements in crop forecasts will likely lower market quotations.
- Global Demand: Changes in global demand for wheat can influence price trends.
- Replanting Success in Russia: The extent of successful replanting in Russia will impact overall supply and market stability.
- Market Speculation: Traders’ activities, including profit-taking and speculative trading, can cause short-term price fluctuations.
Monitoring these factors will be essential for predicting future trends in wheat prices.