Global wheat market: tight supply and strong demand from importing countries boost wheat prices

 

On Friday, the Chicago Board of Trade (CBOT) March soft red winter wheat futures rose 5.
75 cents, or 0.
7%, to close at 834.
25 cents per bushel from a week ago
.
The Kansas City Futures Exchange (KCBT) March hard red winter wheat futures closed at approximately 838.
50 cents per bus, up 3 cents or 0.
4% from a week ago
.
The March hard red spring wheat futures on the Minneapolis Grain Exchange (MGEX) closed at approximately 1014.
50 cents per bus, down 32 cents or 3.
1% from a week ago
.
Euronext's March 2022 milling wheat futures will report about 297 euros/ton, an increase of 3 euros or 1% from a week ago
.
The spot price of Argentine wheat was 310 US dollars/ton, down 7 US dollars or 2.
2% from a week ago, FOB prices
.

 

　　Global wheat supply and demand are tight

 

　　The International Grains Council (IGC) once again lowered its forecast for global wheat production in its November report, highlighting the tight supply and demand of wheat
.
The global wheat production forecast for 2021/22 is lowered to 777 million tons, which is lower than the 781 million tons predicted in the report released on October 21 and slightly higher than the 773 million tons for 2020/21
.
The reason for this reduction in production is that Iran's production has been reduced to 11.
5 million tons, which is lower than the earlier estimate of 14 million tons
.
In October, there were media reports that Iran needs to import a record 8 million tons of wheat in the current year (April 2021 to March 2022) because of the worst drought in Iran in 50 years in 2021
.
Iran’s state news agency ILNA reported on Friday that Iran has imported 4 million tons of wheat since late April
.
The IGC's November report also showed that this year's wheat production in Algeria was reduced to 3 million tons, which was lower than the 3.
5 million tons previously expected and the 3.
8 million tons in the previous year
.
Global wheat ending stocks have also been lowered to 274 million tons, which is 2 million tons lower than last month’s forecast and 4 million tons less than the same period last year
.
Among them, the stocks of the main wheat exporting countries are expected to be 53 million tons, which is 1 million tons lower than last month and 7 million tons less than the same period last year
.

 

　　Rainfall in Australia's wheat harvest season

 

　　In view of the insufficient supply of high-protein wheat harvested in the northern hemisphere, the market is particularly looking forward to wheat from Australia and Argentina, the main exporter of the southern hemisphere
.
The quality of the crops in these two countries has also become the focus of attention .
At present, market participants are increasingly concerned about the harvest in Australia, because the yield is expected to be a bumper harvest, which will ease the tension in the supply of wheat in the northern hemisphere
.
Icon Commodities has raised its forecast for Australian wheat production to 36.
17 million tons, 870,000 tons higher than last year's record harvest
.
However, frequent rains occurred during the wheat harvest in Australia, threatening the quality of the crop
.
The grain merchant giant ADM stated that the continued heavy rains in Australia, especially in the eastern part of the country, are threatening the overall quality of this season's wheat crop
.
After the crops are mature, rainy weather will cause germination and fail to meet the milling quality standards
.
Broker Zaner said the heavy rains have caused traders to re-evaluate harvest expectations
.
CHS hedging company said the protein content may decline
.
The weather service Maxar said that last week there was heavy rain in New South Wales and southern Queensland, and the continued rain showers in the southeast during the weekend will delay the harvest there
.
Western Australia’s harvest should also slow down again this week as rains happen again
.

 

　　European wheat prices rise again

 

　　Euronext’s milling wheat futures continued to climb this week and hit a 14-year high.
Because of the favorable supply and demand situation, Russia may further restrict exports, and the major importing countries are actively purchasing under the background of inflation
.

 

　　According to data from the European Commission, as of November 7, the export volume of wheat from the 27 EU countries reached 9.
787 million tons in the 2021/22 season (July to June of the following year), compared with the export volume of soft wheat from the 27 EU countries and the United Kingdom in the same period last year.
About 7.
84 million tons
.
In its November supply and demand report, the US Department of Agriculture estimated that EU wheat exports in 2021/22 will be 36.
5 million tons, which is 1 million tons higher than the October forecast and much higher than the 29.
73 million tons in the previous year
.

 

　　Improved yield of American winter wheat

 

　　The US Department of Agriculture's weekly crop progress report shows that as of November 14, 94% of winter wheat planting in the United States has been planted, which is the same as the five-year average
.
Somewhat unexpectedly, the excellent and good rate of winter wheat has increased by 1% from a week ago, reaching 46%, which is the same as the same period last year
.
Weather forecasts indicate that temperatures in most parts of the United States may be higher than normal until at least January
.

 

　　The US Department of Agriculture’s weekly export sales report shows that for the week ending November 11, 2021, the US’s 2021/22 net wheat sales were close to 400,000 tons, a 40% increase from last week and a 21% increase from the four-week average
.
However, the total sales of wheat exports so far this year are 13.
7 million tons, which is still 20.
6% less than the same period last year
.

 

　　Spring wheat prices rise and fall

 

　　This week, the US spring wheat futures market rose and fell, mainly because the bulls took profits and sold off their positions
.
Since the beginning of the year, spring wheat crops in major producing countries such as the United States and Canada have suffered a sharp decline in production due to severe weather, which boosted the price of spring wheat by 70.
1% and became a star variety in the agricultural product market
.
However, with the outbreak of floods and mudslides in British Columbia in western Canada on November 14, the rail service to the port of Vancouver was interrupted, which may affect Canadian grain exports
.
The US Commodity Futures Trading Commission's position data shows that as of November 16, speculative funds held a net long position of 14,963 contracts in the MGE hard red spring wheat futures and options market, a decrease of 1,533 contracts from a week ago, but a year-on-year decrease of 6,061.
Hand increased by 146.
9%
.

 

　　Russian wheat prices rise, tariffs continue to rise

 

　　The price of Black Sea wheat has risen by about US$100/ton since it hit a year low in July
.
According to consulting agency IAKR, as of November 12, the FOB price of 12.
5% ​​Russian protein wheat delivered in the second half of November at the Black Sea port was US$328 per ton, an increase of US$2 from a week ago
.
Bad weather in Russia's agricultural production areas this year has reduced wheat production
.
SovEcon, a consulting agency, recently lowered Russia’s wheat production for the year of 2021/22 by 100,000 tons, to 75.
5 million tons, a 12.
1% year-on-year decrease
.
Russia’s wheat exports so far this year have reached 13.
9 million tons, down from 18.
8 million tons in the same period last year
.
The reason for the slow export is that export tariffs have risen from USD 30/ton in August to around USD 70/ton, which coincides with the rise in global wheat
.
As international wheat steadily rises, floating tariffs may increase further
.
Industry insiders believe that Russian wheat exports this year may not reach the 31.
5 million tons target set by the government
.
Last week, the Russian Ministry of Agriculture stated that it plans to impose quotas on grain exports in the first half of next year
.
The tariff calculation method may also be adjusted in order to impose higher tariffs
.
The chairman of the Russian Cereal Exporters Union, Edward Zernin, said that the government can lower the base price used in the tariff calculation formula, which is 200 US dollars per ton for wheat and 185 US dollars per ton for barley and corn, or raise the current 70% tariff rate
.
But the final decision will depend on price movements in the global market
.
Market participants said that the grain export quota in the first half of next year may only be 5 million tons, which means that the export target of 31.
5 million tons cannot be achieved because it is unlikely that exports will reach 26 million tons when the quota is implemented
.

 

　　China's wheat imports increase in the first 10 months of this year

 

　　According to customs data, China's wheat imports in October 2021 were 480,000 tons, a year-on-year decrease of 23.
1%
.
However, China's wheat imports from January to October were 8.
08 million tons, a year-on-year increase of 20.
8%
.
In the past year, China's feed demand has been strong.
The government has put some of the national reserve wheat stored for many years into the domestic market through bidding fairs, which also caused the 2020/21 year of China's wheat stocks to decline for the first time in ten years
.
At the same time, China's import demand for milling wheat has surged, becoming the world's second largest wheat importer in 2020/21
.
China's wheat imports in 2021/22 are expected to remain high.
The US Department of Agriculture predicts that the imports in 2021/22 will reach 10 million tons, slightly lower than the 10.
62 million tons in the previous year
.

 

　　The sown area of ​​wheat will increase next year

 

　　Officials from the Canadian Department of Agriculture (AAFC) said at the Global Grain Conference held in Ninety Wan on Wednesday that next year, the wheat planting area in Canada may increase by 6 percentage points because high prices encourage farmers to expand planting areas
.
Tony McDougall, deputy director of the Food and Oilseeds Department of the Canadian Department of Agriculture, said that preliminary estimates show that the area of ​​durum wheat will also increase by about 10% over this year
.

 

　　According to a planting survey released by the British Agricultural and Horticultural Development Board (ADHB) on Friday, due to favorable planting conditions and soaring prices, the wheat area in the UK is expected to increase to 1.
81 million hectares in 2022, an increase of 1.
3% from 2021
.
AHDB said that considering the favorable autumn weather conditions and the current high prices of feed wheat in the UK, the increase in wheat planting area is not surprising to many people
.
The price of feed wheat in the UK has risen to a nine-year high because of tighter global supplies
.