The Euronext wheat milling futures DEC-23 contract price [Mintec Code: WHT2] settled at €237.75/mt, down 2.76% week-on-week (w-o-w) on 25th October 2023 close. The wheat futures prices were under pressure this week due to favourable rainfall in Argentina and Australia, easing some drought concerns. Also, a decline in European exports and active harvesting in the US kept prices under pressure.
According to market participants, the quality of the new wheat harvest may somewhat improve in Argentina due to received rain over the weekend. A Mintec source added, “about 30-75 mm of rain was received over the weekend, and now it is continuing in the southern regions of Argentina where we have approximately 38% of wheat production and 58% of corn production. The yield outlook is still uncertain, and with the political/economic landscape in Argentina, the outlook for Argentina’s export potential is still not clear. Argentinian farmers’ sales have not yet been updated; they were holding a lot before the presidential election that happened this weekend [22nd October], and they are still holding.” Another Mintec contact added, “I believe that at the end of October and the beginning of November, we will start to see a large movement of wheat in Argentina. I believe that from FOB $290-300/t price levels, it could drop maybe by $20-$35/t. When you compare Argentinian wheat prices with Ukrainian or Russian wheat prices, you can see that Argentina would be out of the market; they will have to adjust their prices lower to be able to compete. So, this might also be an opportunity for Brazilian millers, especially from the south, that are not getting good quality wheat to guarantee their wheat supplies.” Market players are also curious to see what the outcome of Argentina’s presidential election will be as one of the candidates, Javier Milei, promised to eliminate export duties on agricultural products (which is currently 12% for wheat, 12% for corn, 33% for soybeans, 31% for soyabean meal, 7% for sunflowers and 5% for sunflower oil), which could boost grain exports from Argentina.
On another note, on 26th October, Mintec learned that Ukraine suspended the use of the new Black Sea grain corridor due to military risks. This news led to a wheat rally on the day, with Euronext wheat milling futures price closing at €238.5/mt, €0.75/mt higher than the previous day but still down 1.75% w-o-w. Market sources have stated that such a de facto suspension has already been in effect for several days due to the decision of the military, which cited the "explosive threat" that arose as a result of increased Russian aviation activity. A Mintec source added, “I’m not sure if we will see a spike in prices; I believe it will be just a temporary suspension, but of course, the risks remain.” This news could offset the recent supply pressure that the wheat market has experienced.
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