Chicago futures market: Wheat price takes biggest hit in 5 months

11-01-2023 | |
Photo: Canva
Photo: Canva

The wheat price fell by around 6% on the Chicago futures market on Friday, January 6. That is the strongest price drop since mid-August 2022.

Compared to the peak in May 2022, the wheat quotation is already 36% lower.

Strong competition from wheat from the Black Sea region is cited by analysts as an important cause of the sharp fall in prices. According to the consultancy firms Ikar and Sovecon, Russia will export about 3.6 to 4 million tons of wheat in January. And that after the month of December in which even more than 4 million tons were exported.

These are large quantities that the other major providers such as the United States and the European Union have to compete against. Sovecon raises its export forecast for Russia to 44.1 million tons. That is 5 million tons more than last season.

Rouble exchange rate good for Russian wheat exports

Russian exports are supported by a weaker rouble. The value of this coin is still about 1.3 euro cents, compared to 1.6 to 1.7 cents in October/November. This means that the rouble has fallen in value by about 20% in the past month. The dollar reached its lowest point on the first trading day of this year and has since shown a recovery. At the end of last week, the quotation crept back up to above 95 euro cents. This hinders exports from the US.

Australian wheat forecasts continue to rise

However, more factors play a role in the wheat market. For example, the forecasts of wheat production in Australia continue to rise. A record harvest was already taken into account, but new forecasts are adding a lot more. In addition, there are reports from India that more wheat has been sown there. This puts additional pressure on pricing.

Bigger difference between Chicago and Paris wheat prices

The wheat quotation in Chicago closed on Friday 6 January at € 260 per ton. This is about € 40 per ton lower than the prices on the futures market in Paris. This means that the price difference is now much greater than in the price peak in May. Then the price difference between Europe and the US shrank to almost zero.

The average price difference over the last 3 quarters is about € 33 per tonne. The Russian wheat price has been fairly stable in dollar terms over the past few weeks at a level of around $310 per tonne. Converted into euros, that is € 295 per ton.

John Ramaker Commodities market editor, Boerderij
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