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World wheat prices have fallen again this week, which was highlighted by London wheat futures. This extended losses to the lowest level since the middle of last October. Paris wheat futures have led the way down with increasing concerns that the EU export pace is falling behind where it needs to be to meet export estimates. Brussels updated its weekly EU wheat export data, which included French data that was previously lacking. Shipments to 9th January 2022 rose to 15.1 million tonnes, up by 1.1 million tonnes on the week. However, this is less than half the surplus gone with less than half the season left to clear the surplus wheat. Shipments last season at the same time were 14.8 million tonnes from a total available surplus of 27.5 million tonnes. Analyst, Strategie Grains cut its EU wheat export estimate by 300,000 down to 31.2 million tonnes. This was due to strong competition from Argentina and the Black Sea opposing the traditional EU market. It was thought French wheat might be excluded from an Algerian wheat tender held this week.

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Wheat markets made an uncertain start to 2022 but after some early small gains, trade futures prices posted some notable losses. This week, Chicago Board of Trade (CBOT) wheat prices fell to their lowest since mid-October and were followed by the Paris and London futures markets. Strong price support had been expected to continue to come from the world’s major wheat importers – including Egypt, China and Algeria - as it had done throughout December. However, such support was found lacking this week.

This lack of buying was highlighted by very poor weekly US wheat sales data which showed just 48,600 tonnes sold for the current season; traders had been expecting between 150,000-400,000 tonnes to be sold. New crop sales were just 2,500 tonnes. Overall, just over two-thirds of the US wheat export estimate has been sold compared to the 75% average for this period.

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Wheat markets have endured a volatile week of trading, as traders and speculators reacted to the uncertainty of the latest Covid-19 variant Omicron and what it might bring. Having peaked at nine-year highs last week, Chicago Board of Trade (CBOT) wheat futures lost over 10% of their value by close of business on Tuesday. This was due to a wave of panic selling, which caused prices to tumble. European wheat futures made similar losses from their record highs last week.

However, the tight world wheat balance sheet and the availability of milling wheat from the world’s major wheat exporters remain a concern. The lower wheat prices led to several of the world’s major importers issuing fresh wheat tenders, the most significant of those from Egypt. Egypt bought 600,000 tonnes, including 240,000 tonnes from Russia and 240,000 tonnes from Romania. The final 120,000 tonnes it purchased from Ukraine. Prices ranged from $376-379/t including freight for January delivery and, on average, represented a $6/t increase in price over the solitary cargo Egypt bought from Romania on the 17th November. 

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European wheat futures rallied further this week, striking new record-high levels as bullish drivers continue to influence markets. Adverse wet weather across east and southeast Australia has proved damaging for wheat crops with reports of sprouted grains and quality wheat consigned to the feed bin. The world’s major milling wheat importers were hoping that the arrival of a predicted bumper crop in Australia would ease the tight supply of quality wheat and cap record prices but that may no longer be the case.

In New South Wales, where harvest was expected to achieve up to 11 million tonnes, reports suggest that between 50-75% of the crop could be damaged. Better-than-expected yields were reported in Western Australia but managing lower-than-usual proteins is a further complication for exporters to manage.

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The United States Department of Agriculture (USDA) published its November World Agricultural Supply and Demands Estimate (WASDE) report early this week, bringing an end to a short spell of declining prices. A revised estimate for world wheat stocks was released, which was below average trade estimates. The USDA cut world wheat stocks from 277.18 million tonnes to 275.80 million tonnes. This revision changed the negative market sentiment. The profit-taking that was seen from the middle of last week reverted to bullish enthusiasm.

Overall, changes for the wheat balance sheet were modest and few but worth noting. The USDA reflected increasing import needs and revised its exports estimate upwards to 203.16 million tonnes from a previous figure of 199.63 million tonnes. The increase in the exports total was aided by an additional one million tonnes exported from Russia, from 35 million tonnes to 36 million tonnes. However, this is in contrast to the figures released by Russian analyst group SovEcon, which has cut its own Russian wheat export estimate to 34 million tonnes to account for the impact of export taxes.

SovEcon noted more demand from the EU, increasing its European demand estimate from 35.5 million tonnes to 36.5 million tonnes. This is well ahead of other estimates and leaves an untenable ending stock which is too low to meet domestic demand strategic needs.

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Wheat markets have continued to go from strength to strength. Future markets have moved sharply higher, with price gains of over 25% since early September. This rise has been driven by wheat production losses for major exporters Canada, US and Russia and by a loss of French quality amidst strengthening demand.

Official EU wheat export data is not fully accounting for all shipments, but private estimates suggest that the EU will have breached 11 million tonnes by the end of October. Ukraine has exported 12.4 million tonnes of wheat in the first four months of the season, which is half the country’s annual quota. Despite prevailing high prices, there is no evidence of slowing international wheat demand. 

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