Frontrunner - 22nd January 2021

US wheat futures peaked last Friday, ending the 30% price rally that began last August. Futures markets had become technically overbought and were due a correction. US markets were closed for a public holiday on Monday but Chicago Board of Trade (CBOT) wheat futures subsequently posted four consecutive days of losses. London wheat futures peaked on Monday, setting a contract high price that hasn’t been seen since January 2013 before following US markets lower during the week.

One of the primary world price drivers has been increasing concerns for the availability of wheat supplies as Russia looks set to levy an increased tax for its wheat exports. It is proposed that from 1st March, any wheat shipments from the world’s leading wheat exporter would incur a €50/t tax. If this is realised, it would cause considerable disruption to normal grain flows. Later in the week, trade rumours suggested that Russia may instead employ a floating tax on its wheat exports, which analysts believe may help reduce prices. This uncertainty galvanised selling pressure.

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