Market Developments and Price Decline
After significant gains earlier in the week, the wheat market faced losses on Tuesday. A strong Euro and aggressive Russian exports exerted substantial pressure. The December futures contract on Euronext fell by €1.50 to €218.75 per tonne. Similarly, the December wheat contract at the Chicago Board of Trade (CBoT) dropped by 4.5 cents to €20.94 per 100 kg of wheat (approximately 578 ct/bu). Similar downward trends were observed at the U.S. exchanges in Kansas and Minneapolis.
Reasons for the Price Decline
Although wheat futures initially continued their previous day’s gains, profit-taking eventually caused a reversal and a downward trend. Market participants had hoped for positive news that could have triggered additional short-covering by funds, but such news did not materialize. Additionally, the strong Euro put further pressure on European wheat, reducing its competitiveness on the global market.
Weak Demand and International Exports
Global demand for Western European wheat remains weak, while Russia and Ukraine continue to export large quantities. However, experts expect these exports to decrease over the course of the marketing year due to smaller harvests. This could improve the competitive position of EU wheat starting in early 2024. This is already reflected in Euronext’s pricing, where the March futures are trading at a €10 premium over the December contract.
Russia’s Export Pressure and European Trade Data
According to Rusagrotrans JSC, Russia’s wheat export forecast for September was raised to 5.5 million tonnes, including shipments to the Eurasian Economic Union. As of September 22, the European Union had exported 5.86 million tonnes of soft wheat, down from 7.67 million tonnes during the same period last year. EU barley exports also decreased to 1.51 million tonnes, while corn imports rose slightly to 4.72 million tonnes.
Drought Hampers Autumn Planting in Russia and Ukraine
In the short term, drought conditions in Russia and Ukraine could provide some support to wheat prices. The planting of winter grains is progressing slowly due to unfavorable weather. In Ukraine, only 18% of the planned 5.188 million hectares of winter grain had been sown by September 23. Two days later, the area had increased to 1.141 million hectares, covering 22.2% of the target. The Ukrainian weather service does not expect any short-term improvement in the drought conditions, particularly in the eastern regions.
In Russia, there are also indications that the final harvest may be smaller than previously projected. These developments are being closely monitored, as they could have a significant impact on the global wheat supply.
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