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Analysts expect wheat price to rise in Europe

Europe is harvesting less wheat. Analysts at Rabo Research and Agritel therefore expect a price increase. It remains to be seen how much wheat will be harvested in the southern hemisphere later this year.
Prospects are good for European wheat growers. The wheat price is currently under pressure because there is plenty of harvesting going on. Photo: Henk Riswick
Prospects are good for European wheat growers. The wheat price is currently under pressure because there is plenty of harvesting going on. Photo: Henk Riswick

The wheat price will rise in the European Union later this year. Production is so disappointing that there is little left to export. This will lead to price increases, Rabobank writes in an analysis of the world markets for agricultural commodities.

Good prospects for wheat growers

Prospects are good for European wheat growers. The wheat price is currently under pressure because there is plenty of harvesting going on. Buyers are preying on lots for which there is no room in storage silos and this will keep pressure on the wheat price for the time being. After this, Rabo Research expects the price to increase.

“Large exporting countries such as France and Romania harvest much less wheat. Importing countries therefore buy Russian or Ukrainian wheat. Russia can export more wheat, but Ukraine has less wheat available for export. Given these circumstances, wheat is relatively cheap on the futures market in Paris (Matif),” the Rabo-analysts report. As long as the wheat harvest in the southern hemisphere has not yet started, they expect a price-driving effect.

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

The French market agency Agritel also finds that European wheat has been priced too low on the Paris wheat futures. The EU produces less wheat and less wheat is available for export. “The price will have to be adjusted accordingly,” the agency writes in a market analysis.

Wheat exports are difficult

European Commission data confirm that exports are not running smoothly. The EU has so far exported 556,000 tonnes of wheat to third countries this cereal season, which started on 1 July. That is only a third of what was shipped to countries outside the EU last July.

Disappointing harvest in EU supports wheat price
The physical wheat market is affected by the first supply, which is larger worldwide than last season

The wheat shortage in the EU is reflected in the purchasing tenders from Egypt, the largest wheat importer in the world. Egypt mainly buys wheat in the countries around the Black Sea and in the EU.

No wheat from EU to Egypt

News website Agrimoney has listed the wheat purchases of Egyptian state purchasing agency GASC. The latest tender included 470,000 tonnes of wheat for delivery in the first week of September. The wheat is wholly supplied by exporters in Russia (350,000 tonnes) and Ukraine (120,000 tonnes). Not a single grain is imported from the EU.

Throughout July, Egypt bought 1.4 million tonnes of wheat abroad, spread over 7 tenders. Only 60,000 tonnes thereof were supplied by a European country (Romania). The rest was imported from Russia and Ukraine.

Agrimoney’s overview also shows that Egypt pays an average of US$ 215 per tonne in the latest tender, excluding transport costs. That is 2% more than in the purchase tender from a week earlier. The last 470,000 tonne tender was the largest in nearly two years. Egypt apparently anticipates wheat to become more expensive. In such a scenario, it is best to buy as much as possible before prices rise.

Argentina and Australia expect a good harvest

The extent to which the expectations of Rabo Research and Agritel are met will mainly depend on how the southern hemisphere is able to respond to the shortages in the northern hemisphere. Argentina and Australia are the largest wheat exporters there. Both countries are so far expecting good harvests.

IGC: Grain records for production and consumption
The ratio between grain end stock and consumption is declining despite record production in the 2020/2021 season.

The International Grains Council (IGC) expects the world to harvest more wheat (762 million tonnes) than consumed (750 million tonnes) in the 2020/2021 season. As a result, the world stock will grow to a record 288 million tonnes at the end of this season. If the IGC forecast comes true, it could have a further depressing effect on wheat prices in the Northern Hemisphere.