Euronext wheat hits record high on supply uncertainties

Euronext milling wheat futures prices have reached all-time highs amid rising concerns over Australian wheat crop quality and uncertainties over further export restrictions in Russia, which could significantly tighten global wheat supply in the second half of the 2021-22 marketing year.

The Euronext milling wheat front-month contract settled at a record of €309/t ($347.42/t) yesterday, after breaching the €310/t threshold during the trading session.

Persistent rain in Australia continues to disrupt wheat harvesting, reducing crop quality and providing support to milling grade prices globally.

There has been three weeks of heavy rain in the states of Queensland and New South Wales, with wet weather expected to continue to the end of the month. As a result, about 40pc of Australian wheat from the 2021-22 crop could be unfit for milling purposes.

This would further tighten global milling wheat supply, which has already been hit by a lower-quality French wheat crop as well as by a significant drop in Canadian wheat production after a severe drought this summer.

Russia’s introduction of a grain export quota in the second half of this marketing year is adding to the uncertainties surrounding global milling wheat supply. Moscow could introduce a wheat-specific quota in mid-February, while modifying its existing floating export duty formula to impose higher taxes if global wheat prices rise further.

This has fuelled increases in Black Sea wheat prices, with the Argus-assessed Russian spot 12.5pc milling wheat contract closing at $345/t fob yesterday, up by $15/t since the start of the month, and up from $246/t fob at the start of the 2021-22 marketing year in July.

Canadian wheat exports have been disrupted by widespread flooding in British Columbia in mid-November, which caused delays and disruption to road and rail links at the port of Vancouver, while Ukrainian wheat export availability is tightening because of the fast pace of shipments in the first half of the season.

Ukraine’s overall wheat exports since the start of the 2021-22 marketing year have already exceeded 14mn t, up by 2.5mn t from a year earlier, reaching about 55pc of the official target of 25.3mn t for the full marketing year.

Rising concerns over wheat supply are forcing global importers to speed up purchasing to secure their required volumes. China has accelerated purchases of French wheat and Algeria last week booked large volumes of Russian-origin wheat, with both countries lowering their quality requirements for imported wheat.

And global demand for wheat should remain strong in the short term, while supply could be limited in the coming weeks as most sellers in exporting countries have adopted a wait-and-see approach as they monitor developments in Australia and Russia.

Argus Media

Tags: grain, price, wheat