Wheat Market Update - Under Pressure
Monday 9th December 2024
Welcome to this week’s market update! Each week, we'll delve into the market movements and key factors affecting wheat prices. Whether you're a fellow industry professional, a supplier, or simply interested in what’s happening in the market, our updates will offer valuable insights to keep you ahead of the curve.
Market Report
Global markets remain generally slow and uneventful. However, concerns have been raised about Russian crop conditions, with 37% of the crop rated as poor—compared to just 4% at this time last year. This year’s planted area is also expected to be smaller. Over the past five years, an average of only 8% of winter crops have been rated as poor by this stage. Despite this, wheat is a resilient crop that can recover significantly if weather conditions improve, so it may be too early to spark widespread fears in the market.
Adding to the uncertainty, Russia has increased its wheat export duty by almost 32%, driven by high inflation and the poor state of the crop so far.
In the Southern Hemisphere, harvests continue. Rain in Australia has disrupted progress and could lead to quality issues. Nevertheless, harvests in Australia and Argentina are contributing to global wheat availability. Australian output is expected a bumper crop with numbers that could exceed 27 million tonnes, though not likely to surpass 30 million tonnes. Meanwhile, Argentina’s harvest is estimated at 17.5 million tonnes, an increase of 1.6 million tonnes compared to last year.
Russian and Ukrainian exports remain strong, with traders rushing to complete transactions ahead of export quota reductions scheduled for February. Weak global demand has also kept a lid on price increases. Quotas are set at 11 mt for February to June 2025, a significant drop from the 29 mt allowed during the same period last year.
UK wheat prices followed global markets. The strengthening of the pound against the Euro dollar helped weigh on prices. The lack of demand, coupled with the above-average usage of imported milling wheat, is keeping the milling wheat premiums pressured and prices depressed.
The wheat market continues to maintain a delicate balance. Increased supply from Southern Hemisphere harvests provides substantial weight on the supply side, while Russia's stricter export measures and the poor condition of its winter wheat act as offsetting factors. European exporters could see improved opportunities due to a weaker Euro, though competition remains fierce. Overall, prices are likely to stay within a narrow range unless significant supply interruptions or fresh demand catalysts emerge.
