European Wheat Market Starts the Week with Moderate Gains
European Wheat Market Starts the Week with Moderate Gains
Market Summary: The Paris wheat market began the week with a slight increase, with the most actively traded March futures at Euronext closing up 1 EUR at 222.50 EUR/t. Meanwhile, wheat in the U.S. saw a minor decline, as the March futures at the Chicago Board of Trade (CBoT) dropped 0.75 ct to 547.25 ct/bu (201 EUR/t).Key Market Drivers:
- European Wheat Market:
- Weaker Euro: This boosted European wheat exports by improving competitiveness.
- Russian Export Quotas: Russia announced a significant reduction in wheat export quotas last Friday. The announcement provided clarity to the market, and Russian export prices have stabilized over the past two weeks.
- Reduced Port Activity: Russian port export activity showed signs of slowing, further supporting the European market.
- Competition from Australia and Argentina:
- Asian Market Pressure: Wheat shipments from Australia and Argentina are increasing, adding competition, particularly for North American wheat in Asian markets.
- Australian Crop Estimates: ABARES raised its forecast for Australia’s wheat production slightly to 31.9 million tonnes, aligning with market expectations. Despite earlier pessimistic projections due to frost and drought, harvest results have exceeded expectations, leading to upward revisions.
- U.S. Market:
- Export Data: According to the USDA, 296,106 tonnes of wheat were exported in the week ending November 28, a 19% decline from the previous week but a 57% increase year-on-year. Significant destinations included the Philippines (90,000 tonnes) and Mexico (52,143 tonnes).
- CFTC Report: Hedge funds and other financial investors increased their net short positions in CBoT wheat futures to 59,118 contracts (+7,572 contracts) and in Kansas wheat futures to 30,661 contracts (+1,286 contracts).
Regulatory Changes in Ukraine: Ukraine has introduced a new export control system for critical agricultural products:
- Minimum Prices: Exports below government-set minimum prices are prohibited.
- Calculation Basis: Prices are based on customs data from the previous month with a 10% discount applied.
- Monthly Updates: The Ministry of Agriculture will publish and update the minimum prices monthly.
Market Outlook: The European market remains supported by the weaker Euro and Russian export restrictions, though rising shipments from Australia and Argentina pose competitive pressure. In the U.S., uncertainty persists as investors expand short positions and export volumes lag behind expectations. Meanwhile, Ukraine's new export mechanism could impact price dynamics, adding a layer of complexity to global wheat markets.