Euronext Wheat Futures Show Declining Trend Amid Heavy Global Supply
Euronext wheat futures experienced a downward trend for the second consecutive session on Tuesday, driven primarily by updated forecasts from the U.S. government, which emphasized an expanding global wheat supply. As of the afternoon session, March wheat (BL2H6) on the Paris-based Euronext exchange had dipped by 0.3%, settling at 189.75 euros (approximately $220.93) per metric ton at 1705 GMT.
USDA Forecasts Influence Market Sentiment
The U.S. Department of Agriculture’s (USDA) December supply-demand report was a significant factor in the recent market movements. It raised the outlook for global wheat supply, attributing the increase to enhanced harvest estimates from key exporting nations such as Australia, Argentina, and Canada. One futures dealer commented, “Wheat supply is heavy, and USDA increased production pretty much everywhere as expected.” While export demand remains stable, high supply levels continue to exert downward pressure on prices.
Chicago Wheat Reflects Broader Market Trends
Across the Atlantic, Chicago wheat prices fell for the fourth session, hitting a six-week low. This trend mirrors the sentiment in Euronext, illustrating a broader concern over global wheat supplies. Additional pressure came from Argentina’s announcement on Tuesday to cut grain export taxes. However, traders indicated that the impact of this cut might be limited, as one German trader noted, “Argentina’s cut in wheat export taxes remains bearish but will perhaps not generate huge new wheat exports above what can be achieved now with Argentine wheat being the cheapest in the world.”
Emerging Demand Offers Some Hope
Despite the heavy supply, there are signs of new demand. A large tender from Tunisia and a regular tender from Jordan have provided some support to the market. Furthermore, increased selling by German farmers may facilitate exports, especially as dissatisfaction with current prices leads to higher sale volumes. The overall market balance could improve should these tenders translate into actual orders.
Rapeseed Market Shows Signs of Recovery
In contrast to the wheat market, rapeseed futures saw a positive shift. February futures (COMG6) on Euronext climbed by 1%, reaching 476.50 euros a ton, a welcome recovery from Monday’s near seven-week low of 471.75 euros. A significant driver for this bounce-back was the German government’s approval of a draft biofuels law. This legislation allows for the continued use of food crops, including rapeseed, in biofuel production while eliminating double-counting for waste-based biofuels.
Implications of New Biofuel Regulations
The potential changes in biofuel legislation are a critical development for the rapeseed market. “This is supportive for the rapeseed market as the new government is permitting continued use of rapeseed oil in biodiesel,” noted a German trader. The elimination of double counting could also spur new demand for rapeseed oil, although uncertainties still linger regarding the exact timing of these new regulations.
Investment Position Adjustments
Recent data from the exchange suggest a shift in investor sentiment. Financial investors have reduced their net short position in Euronext wheat and have also cut their net long position in rapeseed. Such adjustments indicate a cautious approach amid fluctuating market dynamics, reflecting both the supply pressures in the wheat sector and the potential for demand growth in the rapeseed market.
Currency Exchange Context
For those monitoring international trade, it is worth noting the current exchange rate: $1 equals approximately 0.8589 euros. This conversion rate can significantly influence market dynamics, particularly for exporters and importers navigating the global grain landscape.