In recent seasons, we have been dealing with such great turbulence and changes that deviate from the norm that, in fact, none of the principles worked on the market as usual, such as the fact that prices during the harvest are always lower than later, after it. There were political suggestions that were not always justified in reality, and we also had problems with assessing grain stocks, which also incorrectly affected the calculations of the grain balance. Some forecasts in March mentioned 3-4 million tons, others over 8 million tons, which resulted in the introduction of grain subsidies. As a result, with the beginning of this year's harvest, the Ministry of Agriculture announced that it would monitor the situation on the domestic and also on the global grain market. It announced cooperation with analytical units in this regard, so that our country had specific figures regarding the current situation, the state of storage stocks, and farmers could ultimately make the best decisions, and not be guided by "political forecasts". And so that he also does not look at the subsidies, which stopped the trade of grain on the market and ultimately usually contributed to the drop in grain prices. Checking directly with farmers who submitted applications for this year's grain subsidies, it turned out that they were mostly so-called smaller farmers who were simply waiting with the sale of grain for the subsidy, so-called commercial farmers could only benefit from them to a small extent, for example only in 20 percent of the sales volume, because at the time the subsidies were announced, they had already sold part of their stocks. Why? Because for years, as I wrote at the beginning, they have been diversifying the risk and spreading it over individual stages. They sell some, e.g. 20-30 percent of grain, immediately after the harvest, another 30-40 percent at the end of the year, and the rest in February-March. They possibly keep about 10 percent for the so-called early harvest. And thus the so-called average price – they have been operating this way for years and this is the mechanism they recommend to others.
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When was grain the most expensive?
The last seasons are not entirely reliable due to the war on our border, but we present how the prices of wheat for consumption were shaped in the following dates: in July, at the end of August, in December, in March and in the beginning of June. They usually increased over time. Has it been like this in the last few years?
We start with the 2023/2024 season, when wheat prices were as follows: July – PLN 830/t, end of August – PLN 870/t net, December – PLN 840/t, March – PLN 720/t and beginning of June – PLN 820/t. Fluctuation was visible here. In the 2022/2023 season, wheat prices after harvest dropped significantly and amounted to: PLN 1,440/t, PLN 1,450/t, PLN 1,300/t, PLN 945/t and PLN 840, respectively, but this was due to the outbreak of the war in Ukraine, when in March 2022 the wheat price was the highest and amounted to an average in the 2021/2022 season of: PLN 800/t, PLN 980/t, PLN 1,260/t, PLN 1,600/t, PLN 1,450/t, respectively. We had more predictable prices before Russia's attack on Ukraine, in the 2020/2021 season, the prices of consumption wheat on these dates were, respectively: PLN 700/t, PLN 670, PLN 820/t, PLN 920/t and PLN 980/t. Even earlier, in the 2019/2020 season, wheat prices were as follows: PLN 670/t, PLN 640/t, PLN 700/t, PLN 720/t and PLN 740/t.
What do these data from harvest to early harvest show? Well, as I wrote above, in recent seasons the previously practiced principle of grain costing the least during harvest and usually becoming more expensive over time has not been in effect on the market. This principle is visible in the "oldest" seasons presented, when wheat was the cheapest in July and the most expensive in June, just before the next harvest. What will happen now? The war in Ukraine is still ongoing and there are still many question marks in this regard, in addition to this the weather and crop balances are important, which I will discuss below.
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Grain price forecasts for the current season
Price forecasts relative to those recorded at the beginning of July were given by Wojciech Sabarański from Sparks Polska during the Gdańsk Grain Exchange held on July 11. He gave a lecture entitled "The grain market in Poland and around the world at the threshold of the new 2024/25 season – what awaits us?", during which he divided the 2024/2025 season into two parts. In relation to its first half, he noted that a moderate increase in prices would be possible. He justified his forecasts, among other things, by the fact that the world is emerging from slightly lower price levels than those recorded at the beginning of the previous season. Additionally, there is harvest pressure in the northern hemisphere and, in his opinion, also importantly, we can expect greater competition in exports due to the ban on wheat imports until October 15 introduced by Turkey. Speaking about the second half of the season, the analyst indicated that it would be possible to accelerate the dynamics of grain price growth then. Why? Because he expects a more visible tension in the production balance. He also mentioned the impact of weather in South America due to the La Nina phenomenon and thus a possible correction of corn harvests in Brazil and Argentina. Prices will also be influenced by Russia's policy, when it decides to possibly limit wheat exports.
The representative of Sparks also provided data on the grain balance during the meeting. He recalled that the total grain harvest in the new season is expected to be record-breaking, at 2.312 billion tons, which is 15 million tons more than the previous year. Of this amount, as much as 1.2 billion tons is corn, and almost 800 million tons of wheat. At the same time, he noted that global grain stocks are expected to be at 582 million tons, which is 9 million tons less than in the previous season and, importantly, the lowest in ten seasons. He also provided specifics regarding wheat alone. The global balance of this species is very tight, because wheat stocks in the main exporters are the lowest in twelve seasons. Countries such as Russia, Ukraine, France and Germany are expected to harvest less of this species. On the other hand, Australia and Argentina will see an increase.
The article comes from the August issue of Farmer 2024 magazine.
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