European Wheat Prices Surge
Over the past month, European wheat prices have seen a significant increase, primarily due to forecasts predicting a reduced harvest in the Russian Federation for 2024. This price surge has led to a noticeable slowdown in wheat exports from the European Union (EU) while simultaneously boosting wheat supplies from Russia.
Market Reaction and Price Trends
September wheat futures on the Euronext exchange in Paris surged by 14.3% in May, reaching 259.25 €/t ($280.7/t). Since March 1, these prices have risen by a substantial 29%.
EU Wheat Export Slowdown
The European Commission’s delayed data release indicated that EU wheat exports for the week of April 27 – May 3 totaled only 41,000 tons. For the entire 2023/24 marketing year, exports reached 26.26 million tons, 4% lower than the previous year’s pace. Despite the USDA’s May report maintaining its wheat export forecast for the EU at 35 million tons for the season, achieving this target in the remaining two months appears unlikely, suggesting an increase in EU wheat stocks.
Record-Breaking Russian Wheat Exports
Experts at SovEkon predict that the Russian Federation will break its wheat export record for May, shipping 4.1 million tons, far surpassing the 5-year average of 1.5 million tons for this month. The Russian Grain Union reported that wheat exports from May 1-20 reached 3.4 million tons, contributing to a total of 50.5 million tons for the 2023/24 marketing year. Russian analysts estimate the season’s exports at 52 million tons, while the USDA has raised its forecast to 53.5 million tons, up from 48.1 million tons in 2022/23.
Competitive Pricing of Russian Wheat
Russian wheat, with a protein content of 12.5% and for delivery in May-June, is priced at $235-238/t FOB. This is $20-21/t lower than German and French wheat, enhancing the competitiveness of Russian grain. The price gap between Russian and European wheat has reached its highest level since July 2023, following the cancellation of the “grain agreement.”
Impact of Weather Anomalies on Russian Wheat Production
Weather anomalies in central and southern Russia prompted SovEkon to reduce its wheat production forecast by 7.2 million tons to 85.7 million tons within three weeks, leading to increased prices. This anticipated price rise ahead of the new season may reduce buyer demand until the global wheat harvest is more clearly understood.
Ukrainian Wheat Market Adjustments
Following the price trends of European and Russian wheat, purchase prices in Ukraine for wheat with 11.5-12.5% protein content have risen to $200-210/t with delivery to the port, equivalent to $215-230/t FOB. Due to heavy rains, the share of food-grade wheat in the 2023/24 harvest has decreased, resulting in lower stocks. Additionally, reduced sowing areas and a lack of precipitation in April-May are expected to decrease wheat production in the new season, likely contributing to further price increases.
Conclusion: Factors Influencing Wheat Prices
Several factors could determine whether wheat prices will rise, remain stable, or fall:
- Harvest Forecasts: Any changes in harvest forecasts, particularly in major producing countries like Russia and the EU, will significantly impact prices.
- Weather Conditions: Weather anomalies and adverse conditions can reduce production and drive prices up.
- Export Dynamics: Competitive pricing and export volumes, especially from Russia, will influence global supply and demand balances.
- Market Demand: Buyer demand may fluctuate based on price trends and available stock levels, impacting market stability.
Monitoring these elements will be crucial for understanding future market movements and pricing trends in the global wheat market.