Analysis Grains

Wheat price hits bottom and bounces back

June 28, 2024 - Niels van der Boom

The arrival of stable summer weather and even a heatwave in parts of Europe allows the combine harvesters to do their work. This gives the market a better indication of the expected harvest volumes and quality. At the same time, dry weather brings new concerns.

In Europe, the combine harvesters are mainly busy with the winter barley harvest and a few fields of rapeseed. The harvest is on average a few days earlier than usual. In the south of Europe, winter wheat is already being harvested, as well as in the far south of Russia. Traditionally, this puts some pressure on the wheat market, as was also seen on the Matif. The September contract closed on Thursday, June 27 at €227.25 per ton. That is €3.75 more than the closing price on Wednesday. This means the price is picking up again.

Harvest of wheat in the US nearing completion
In the US, the combines have been running for over a month. In the nine largest wheat states, the harvest is between a quarter and 95% completed. Especially in Oklahoma and Arkansas, the harvest is well advanced. 85% to 95% is significantly higher than the five-year average, which is around 50% by the end of June. The yields and quality are average to good. After sufficient rainfall in the northern US, the spring wheat is also looking better there.

After being in the red earlier this week, the CBoT in Chicago was back in the green for wheat on Thursday. The July contract rose by 3.5% to $5.6 per bushel. Corn dropped $5 to $4.15 per bushel and soybeans ended at $11.52¾ also in the red.

Further north, in Canada, Bloomberg estimates a wheat area of the equivalent of 11 million hectares after its own research. This is over 80,000 hectares more than previously thought in March. The canola area remains stable this season at 8.7 million hectares, according to the news agency.

New harvest purchases
After Egypt earlier this week, more countries have emerged as buyers for wheat. State agency OAIC in Algeria reportedly purchased between 130,000 and 150,000 tons of new harvest wheat during a tender. Prices were said to range between $248 and $250 per ton C&F (delivery from August to October). This is more than what Egypt bought earlier this week, mainly from Russia ($227 to $230). Jordan also purchased 60,000 tons of wheat, for $256, while South Korea ordered feed wheat and corn from South America.

In Australia, meteorological stations and the agricultural sector are closely monitoring the weather. The El Niño weather effect is currently considered neutral. Since December, the sea surface temperature in the Pacific Ocean has been cooling. The Bureau of Meteorology expects this trend to continue in the coming months. A La Niña may form in September, which traditionally brings more rain to the west coast of the country and drier weather to the east.

Drought not only positive
The current dry period is good news for the Western European countries. There is still enough moisture in the soil. However, arable farmers are concerned about how the crops will withstand a longer warm period because the root system has developed minimally this year. It could give a final blow to later cereal crops, of which many are growing this year.

From East Germany towards the east, Poland and Romania, it is quite dry. The winter grains there are so mature that the weather for the harvest is desired. Farmers are worried about the impact on corn and sunflowers.

Niels van der Boom

Niels van der Boom is a senior market specialist in potatoes and other soft commodities at DCA Market Intelligence.
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