In W39 in the wheat landscape, wheat experienced its most significant quarterly price losses in 14 years, primarily due to record harvests in parts of the Northern Hemisphere, leading to increased global wheat stocks. These ample wheat supplies offset tensions in the Black Sea region following Russia's withdrawal from the grain deal. Chicago wheat futures declined by approximately 11% over the past three months and are expected to continue falling in Q4-23. Despite Russia's withdrawal from the Black Sea grain agreement, significant wheat supplies kept prices suppressed, with Russia achieving an unprecedented harvest. Notably, Russia continues to export wheat from the temporarily occupied territories of Ukraine. Due to this situation, Ukraine sought alternative export routes, including the Danube River. While opening these corridors may increase wheat supplies, the global wheat market's competitive nature is anticipated to continue exerting downward price pressure in the coming months, with uncertainty and risks remaining.
The European Commission (EC) expects the European Union (EU) common wheat harvest to reach 125.3 million metric tons (mmt) in the 2023/24 season, a downward revision of 800 thousand metric tons (mt) compared to the Aug-23 estimate. EU soft wheat production is also expected to be slightly lower than the 2022 harvest of 125.7 mmt, a marginal decrease of 0.3% year-on-year (YoY), but 0.8% larger than the five-year average.
Notable variations in soft wheat production are observed across the EU in 2023/24, with Spain, Estonia, and Latvia experiencing minimal harvests, primarily due to low yields despite expanded planting areas. Conversely, the Netherlands, Italy, and Slovakia registered significant increases in soft wheat production, with volumes exceeding the five-year average by over 10%, driven by expanded wheat cultivation. France and Germany, the EU's largest wheat producers, achieved fairly normal harvests. The French soft wheat harvest is estimated at 34.9 mmt in the 2023/24 season, while German soft wheat production is expected to reach around 20.7 mmt.
Exporters' wheat purchase quotes in official price lists in Russia remained steady at USD 171.43/mt at the end of W39, while actual declared rates ranged from USD 147.23/mt to USD 149.24/mt, excluding value-added tax (VAT). The market experienced minimal liquidity, with farmers increasingly willing to sell their crops at the prevailing reduced prices. However, exporters were hesitant to buy due to insufficient volumes of new contracts for the Nov-23 to Dec-23 period. While this situation doesn't necessarily signify a sharp drop in exports by year-end, it does reflect a substantial wheat surplus compared to the current global importer demand. Currently, there are no apparent catalysts to alleviate this surplus unless a significant decrease in the free-on-board (FOB) prices occurs. Possibly, participation in the General Authority for Supply Commodities (GASC) tender could attract increased demand from importers.
Lastly, China has raised the minimum purchase price for grade 3 wheat for the 2024 harvest to USD 327.86/mt, a slight increase of 0.85% from the USD 325.08/mt in 2023. This decision to raise the minimum price was based on a comprehensive analysis considering factors such as wheat production costs, domestic and global market prices, and supply and demand dynamics. The move aims to support domestic food production and ensure that farmers receive fair compensation. The Chinese government plans to purchase up to 37 mmt of the new wheat crop at the revised minimum price. China utilizes this mechanism to intervene in the market, stepping in to buy wheat from farmers when market prices dip below the established minimum price to bolster food security and stabilize agricultural incomes.