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High wheat yield depresses the price

Wheat production in Europe may suffer from drought, but more than enough is available worldwide. The coming corn harvests also promise great yields. Prices are under pressure.

Both the European Commission and the International Grains Council have revised expectations for the wheat harvest in the EU, due to the continuing drought.

Worldwide, the wheat harvest is expected to increase by 1%, mainly due to record production in China. Photo: Mark Pasveer
Worldwide, the wheat harvest is expected to increase by 1%, mainly due to record production in China. Photo: Mark Pasveer

Since the previous forecast released in May, the decline has been about 3%, or 4 to 4.5 million tons of wheat. Worldwide, the wheat harvest is expected to increase by 1%, mainly due to record production in China. The question is whether that will make a big difference in the export markets, China is a country that likes to keep extra stock and the market data from China is not also always reliable. The US Department of Agriculture therefore provides separate figures for world totals with and without China in market reports.

Futures market
Overview of futures prices for: corn, wheat and soybean

Pressure on prices

On the futures market in Paris, the price for wheat, contract September 2020, has therefore fallen by approximately € 10 per ton in one month. The previous week alone went off € 4. Still, the week started on Monday, June 29, quite positively, at least not with pressure on the price anymore. Although the quotation for the August contract for maize was slightly depressed in June, the level is currently very reasonable in Paris.

Chicago is also showing some price cuts for wheat. The US has insufficient support from export activity, which is below par. Last week, for the corn price in Chicago, there was much more pressure on forward prices. Monday, June 29, the situation seemed to clear up again, but the price is suffering from good weather forecasts for the harvest, which is going to be big anyway. Calculated worldwide, approximately 5% corn will be added compared to the current fiscal year 2019-20, according to the IGC. In May, that forecast was still 3%.

The pressure on prices does make market parties more eager to buy. Egypt recently purchased 120,000 tons of milling wheat in Russia, 60,000 tons in Ukraine and 60,000 tons in Romania. Algeria, one of the major grain importers, has also issued a tender for wheat, Agritel reports. It is expected to be completed by France, Poland or one of the Baltic States.