The recent increase in wheat prices, driven by initial reports of potential harvest failures in France, has largely dissipated. The price of wheat is approaching the lows observed in mid-July, which marked a four-month low for the September contract on the Euronext exchange. The pressures influencing this trend are multifaceted:
- Abundant Global Supply:
- U.S. Wheat: At the Chicago Board of Trade (CBOT), U.S. wheat prices have fallen to a four-year low of 516 cents per bushel. This decline follows projections of record-high yields in North Dakota, where crop tours are indicating exceptionally high harvest outcomes.
- Black Sea Region: Wheat from the Black Sea region is presenting significant competition. SovEcon, a Russian agricultural consultancy, has revised its Russian wheat harvest forecast to 84.7 million tonnes, up from earlier estimates of less than 80 million tonnes. This marks a substantial increase from previous market concerns.
- Price Comparisons: Russian wheat with a protein content of 11.5% is priced at $210-$212 per tonne FOB. Ukrainian wheat is slightly more expensive at $211-$215 per tonne, while Romanian wheat ranges between $218-$226 per tonne. In contrast, the Euronext contract is trading at over $230 per tonne.
- French Harvest Outlook:
- Current Conditions: As of late last week, only 50% of French wheat crops were reported to be in good or very good condition, down two percentage points from the previous week and 28 percentage points lower than the previous year. This marks the lowest rating at this time of year since 2016, when France experienced its worst wheat harvest in three decades.
- Harvest Progress: Harvesting is underway, with 41% of the area now harvested, an improvement from 14% the previous week. However, this is still 35 percentage points behind the previous year’s progress. Additionally, quality issues may pose challenges for delivery against the Euronext futures contracts.
While the French wheat harvest faces substantial challenges and potential quality issues, the overall wheat market is under pressure from low prices and a surplus of supply from other regions. The high yield forecasts from North Dakota and the increased production estimates from the Black Sea region are keeping global wheat prices competitive, thereby dampening the impact of French harvest concerns on the market.
In the long term, the market will need to account for the difficulties in French wheat production. The combination of global supply dynamics and localized production issues will continue to influence price movements. Farmers and agronomists should stay informed about these developments to better navigate the evolving market conditions.
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