Price pressure continues until new grain harvest

The price recovery in the wheat market at the beginning of this week is seen by some as a bright spot. Others see it as nothing more than a temporary correction to the sharp price drop in recent weeks. Reference is made to the large quantities of wheat that still have to be given a destination worldwide.

China cancels orders

Russia currently exports huge quantities of more than 1 million tons per week. To keep up the pace, they are lowering sales prices to below $ 200 per ton. This equates to prices of just over € 180.00 per ton. The price level of the May soft red wheat contract on the Chicago futures market has fallen to a similar level.

Although wheat export sales in the United States are ahead of last year, it is expected that this season will ultimately ship 5% less than a year ago. This is partly because China is cancelling orders. Until the end of February, there were about 2.5 million tons of wheat in the order book for export to China, but the country quickly cancelled the purchases of 0.5 million tons of wheat.

Considerable price difference between old and new harvest

In the United States, the state of new wheat is currently much better than a year ago. Despite a smaller acreage, more wheat is expected to be harvested there. In Russia too, wheat production is expected to be slightly higher than last year. Harvest expectations are lower in Ukraine and the European Union.

Price difference between old and new harvest

All in all, traders assume that the ratio between supply and demand will be tighter next season than it is now. This is now reflected in a considerable price difference between old and new harvest. On the Paris futures market, the price level of the December contract is € 17.00 per ton above the quote for delivery in May this year. That price difference is attractive enough for some parties to keep old wheat until the new season. However, this will not happen on a very large scale, because in most places the storage must be emptied before the arrival of the new harvest.