Wheat prices continue to fall and can only be supported by increased demand from China

December wheat futures have fallen by 1.2-3.5% since Monday and continue to fall amid forecasts of a global economic slowdown, lower demand and improved planting conditions.

Yesterday, December futures fell:

• by 1.7% to $204.4/t – for soft winter SRW wheat in Chicago (-3.5% since the beginning of the week),
• by 2.6% to $231.2/t – for hard winter HRW wheat in Kansas City (-2.2%).
• by 1.2% to $260.6/t – for hard spring HRS-wheat in Minneapolis (-1.4%).
• by 1% to €229.5/t or $242.6/t – for wheat on the Paris Euronext (-1.2%).

Warm weather with precipitation in the USA favors the sowing of winter wheat, with which 84% of the planned area was sown on October 29 (85% on average over 5 years). In Ukraine, 3.75 million hectares or 84% of the plan have already been sown, and warm weather next week will allow sowing to continue.

Wheat exports from the US are slowing down, and as of October 26 are 7.114 million tons, which is 36% lower than last year’s 9.65 million tons. The EU exported 9.68 million tons of wheat on October 22, which is 23% lower than last year’s pace, while imports wheat during this period increased by 69% to 3.82 million tons.

In October, the Russian Federation reduced wheat exports by 15% compared to September to 4.75 million tons, but in total shipped 22 million tons in the season, which is 38% higher than last year’s pace.

Prices for Russian wheat are $225-230/t FOB, which is significantly lower than prices for European and American wheat, which are at $245-250/t FOB. Ukraine can only offer cheap fodder wheat at a price of $165-180/t FOB. In the current season, the share of food wheat in the Russian Federation is 70-80%, while in Ukraine 70% of wheat is of fodder quality.

Traders hope that China’s active purchases will support global prices, which this year have fallen by more than 25% (based on the base price of Chicago futures) under the pressure of significant supply from the main exporter – the Russian Federation.

China, the world’s largest producer and consumer of wheat, purchased 2.5 million tons of French wheat for delivery in December-March in September, and almost 2 million tons of new-harvest Australian wheat for delivery in December in October. According to Reuters, China plans to import a record amount of wheat, as prolonged rains have reduced the quality of its own crop, and dry weather in the main exporting countries forces China to build the necessary stocks at so far low prices.

According to customs data, in January – September, China increased wheat imports by 53.6% to 10.17 million tons, of which Australia left 6.4 million tons and Canada 1.8 million tons. Traders believe that China will import 12 million tons of wheat in 2023, which will exceed the record of 9.96 million tons in 2022, and will also continue active imports in 2024.

For the first time in 7 years, wheat production decreased in China. Despite the increase in the area sown, the harvest decreased by 0.9% to 134.5 million tons, of which 20% is of fodder quality, so it will go to feed pigs, which will reduce the demand for soybeans and soybean meal.

Tags: China, prices, wheat