Chart 3
THE FRENCH HARVEST RESULTS HAVE LED TO SOME COUNTRIES LIKE ALGERIA, SAUDI ARABIA AND CHINA EASING IMPORT SPECIFICATIONS.
Source: Euronext Chart 4
Once the quality concerns became apparent we saw a remarkable jump, not only in price but also open interest. The Euronext milling wheat December 2021 open interest peaked at 338,744 lots, and the current contract high currently stands at 254.25 (highest price we have seen in almost 9 years). The below Euronext milling wheat seasonality chart, looking at the December open interest over the last 5 years, shows a fairly large increase in activity. (Chart 4).
In Strategie Grain’s recent publication on the 16th of September, they anticipate there to be just under 80 mmt of milling wheat in the EU, this is compared with over 85 mmt in 2020 and despite of the sizeable increase in year on year overall production volumes.
The EU commission, as of the 14th September report, saw EU total wheat exports at just over 6 million tonnes, running 44% above last year. It is noted that over 50% of this has come out of the Balkans, of which large volumes went to feed wheat destinations. However, we are not long into the 2021/22 marketing year (1st July – 30th June) and demand is strong.
Source: Thomson Reuters
The French harvest results have led to some countries like Algeria, Saudi Arabia and China easing import specifications. Some Chinese importers are reportedly now accepting down to 75 kg/hl, against 77 kg/hl initially. The Saudi Grains Organization (SAGO) have reduced their spec weight requirements to 76 kg/hl to reportedly help European offers. FranceAgriMer have also played down the importance of test weights and were implying this is more a cost factor for flour millers than it being detrimental to baking quality. Regardless, if participants are using the Euronext milling wheat contract to try and ensure they can get their hands of full milling spec wheat and there isn’t this grade of wheat available and in the hands of the short, we could see some fireworks.
With a shortage of milling grade wheat in Europe (especially France) I will be keeping a close eye on the open interest as we start to approach expiry of this season’s Euronext milling wheat contracts, with what looks like potential for a short squeeze.
Ryan Easterbrook E:
ryan.easterbrook@admisi.com T: +44(0) 20 7716 8054
11 | ADMISI - The Ghost In The Machine | Q3 Edition 2021
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