Wheat Prices Are Falling Due to Decreasing Demand

The end of last week was marked by bad news for farmers who specialize in growing wheat. The value of this crop in the world began to decline. Experts point out two reasons that led to a reduction in the cost of wheat – good weather in countries with large sowing areas of winter crops, as well as low interests of importers.

Last week there was a global jump in wheat prices. It was due to a major deal between China and the United States for the supply of corn to the PRC, and due to the accompanying expectations for wheat. However, the growth turned out to be speculative and expectations did not come true.

Wheat exports over the previous 7 days increased by 15% or by 380.5 thousand tons, however, market expectations were at the level of 600 thousand tons. Total sales of wheat for the period from the beginning of the year were 4% higher than in the previous year. However, last week the figure was 5.4%. In total, 21.77 million tons of wheat were sold in the first 4 weeks of 2021.

The United States increased its exports by 91%, in gross terms it amounted to 505.7 thousand tons. For the current season, the total volume of exports reached 15.5 million tons, with a forecast of 26.8 million tons. Thus, in order to meet the projected numbers, the United States needs to ship 11.3 million tons of wheat or 630 thousand tons every week by June 1.

Also, the price decline was influenced by the deal between Japan and Australia. Japan has signed a contract for the supply of 60 thousand tons of Australian wheat until April 1, 2021. Previously, the main supplier of goods to Japan was the United States.

Similar movements are observed on the French stock exchange. Since January 28, the market growth has changed to a decline. The mood of French traders has deteriorated after the news from Algeria. Algeria purchased 660 thousand tons of wheat, of which only 270 thousand tons went to France. Instead, Algeria's imports from Argentina increased to 210 thousand tons. In this regard, futures for milling wheat in March on MATIF amounted to USD 278.19 per ton (USD -1.51 per ton).

Also, the price was influenced by the improved forecast for the export of soft wheat from the European Union. This figure is 26 million tons, which is 2 million tons better than the previous forecast.

As for Ukrainian wheat, futures for it began to recover. Over the previous week, prices rose to USD 270-275 per ton.