July 12, 2018

Harvest pressure leads to a short-lived correction

After settling at its highest since early July 2017 at 189.75€/T [~£168/T], Dec-18 Matif wheat embarked for what could be a short-lived correction due to harvest pressure, a rebound in the euro and the ongoing risks associated with the US-China trade war.

Fundamentals are at least supportive, not to say bullish for EU wheat, with further cuts to be expected in Germany and across Northern Europe after weeks of persistent dryness coupled with well above normal temperatures.

Overall, the EU soft wheat production is set to post a 4-5% yearly decline with the CRM Agri forecast standing at 135.3MMT for soft wheat (141.8MMT last year) and 144MMT (151.1MMT last year) for all wheat production. In France, the wheat harvest is progressing rapidly  and said to be of good quality whilst the size of the crop varies greatly between 33MMT to 36+MMT. The French Ministry stated that the 2018 wheat production should fall only marginally from last year and it would still about 1% above the 5-yr average with average yield seen at 7.30T/ha vs 7.36T/ha last year. In Germany, losses could be even more severe with the country’s Farming Association expecting a 15% drop compared to 2017 to only 20.5MMT – 13% protein German wheat FOB trades at its highest level since July 2015. A similar trend is observed in the Black Sea with Russian wheat FOB prices about $10-15/T above last year’s prices. The worrisome spring crop conditions continues to underpin the market.