Kotak Commodity Services Ltd

*Euronext wheat futures fell traders adjusted positions

*World food prices jumped 28% in 2021 to their highest level in a decade

Chicago wheat futures lost third session more ground on Thursday after the US Department of Agriculture (USDA) estimates for wheat inventories added pressure on the market. After supply concerns drove Chicago Board of Trade futures prices to nine-year highs in November. CBOT March wheat settled at $7.49. Commodity funds were net short in wheat futures, leaving the market vulnerable to hedging short positions. Wheat lost 3.6% last week.

Euronext wheat futures fell after a three-day rise as traders adjusted positions before widely followed US crop data while also assessing mixed signs for European exports. March milling wheat contract on Paris-based Euronext, was down 3.50 euros, at 273.25 euros ($311.86) a ton.

There were marginal changes to projected global wheat supplies and use this month. Notably the USDA increased production forecasts for the EU (+0.2 mmt) and Argentina (+0.5 mmt), which were partially offset by reductions in Brazil and Paraguay due to drought conditions. World food prices jumped 28% in 2021 to their highest level in a decade and hopes for a return to more stable market conditions this year are slim, the UN's food agency said on Thursday.

The retrieval of the French data put the bloc's soft wheat exports so far in 2021/22 well above last season, when 15.11 million ton had been exported by the same week, the data showed. a 1 million ton jump from the previous update However, a run of exports by Brazil was creating competition for German wheat. Analysts surveyed on average expect the USDA on Wednesday to report the tightest US Dec. 1 wheat stocks since 2007.

The National Agricultural Statistics Service of the US Department of Agriculture estimated area planted to winter wheat for harvest in 2022 at 34,397,000 acres, the most in six years, sending wheat futures to session lows, it’s up or 2.2%, from 33,648,000 acres in 2021. But stocks on Dec. 1 at a 14-year high of 1.390 billion bushels.

According to Indian Agriculture Ministry data for sowing reported under wheat is 33.397 million hectare against 33.981 million hectare area of last year i.e. decrease in area coverage by 5.84 lakh hectare while for rice, it is 1.644 million hectare against 1.869 million hectare area of last year i.e. marginally decrease in area coverage by 2.25 lakh hectare.

Argentine farmers are expected to harvest 21.8 million ton of wheat, according to the Buenos Aires Grains Exchange. Due to higher-than-expected yields as farmers wrap up harvest. Along with the advance of the harvest, the yields collected in the southeast of Buenos Aires were improving, a key region due to its yield potential and its surface contribution to the national total planted.

(Disclaimer: This analysis is only for educational purpose and is not and must not be construed as investment advice. It is analysis based purely on economic theory and empirical evidence. Readers are requested to kindly consider their own view first, before taking any position.) Date: 14-1-2022

Kotak Commodity Services Ltd

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