General market situation: unprecedented price increases

Wheat price reaches record high

The price of wheat continues to rise towards a record high. At the Chicago futures market, wheat prices rose to the highest level in nine years. Last week in Paris, a tonne of wheat traded for a record 297. Since September, the price of wheat has risen by about a third.

As already communicated, poor weather meant that harvesting conditions were not ideal and yields of quality wheat fell below expectations. Today, there are a number of other factors that continue to support the upward trend.

The main reasons for this are:

• Wheat consumption is higher due to the late maize harvest.

• Once again, the Russian levy on wheat prices has been increased. It is expected to rise further within a few weeks.

• The lack of transport capacity in the EU due to low water and maize currently being prioritised over wheat.

• If there are farmers who want to sell, it is at the current high Matif for immediate delivery (good price, instant cash and customers are more likely to accept poorer specifications). Farmers have little interest in offering longer term supplies unless a surcharge is paid over the price of immediate delivery. The inverse on the Matif complicates negotiations.

• Premiums have also continued to rise for the new harvest due to the lack of fertilisers and suitable seeds, which means farmers will mainly fertilise for yield and not to increase protein. As a result, there is little to no supply of high protein wheat from the EU with regard to the new harvest. The shortage of fertilisers will get worse if gas prices do not decrease soon (gas is needed in the fertiliser production process).

There is a very good chance that, like last year, we will see that wheat is increasingly difficult to find from April onwards. The EU wheat balance is no more favourable than last year AND the quality is worse. It is very likely that there is a lack of higher protein too. Towards the end of the harvest year, there will probably be insufficient EU maize. As a result, the animal feed sector will compete with the milling sector for wheat at the end of the harvest year.

To ensure that you can buy quality flour, we strongly recommend that you cover your requirements before April 2022.

Continued increasing energy prices also have a strong impact on other commodities. In addition, nervous buyers are creating extra tension on the market. In turn, the unprecedented volatility on the market attracts investors, who want to take advantage of these market movements, which leads to a chain reaction with even more volatility and increases.

We reiterate that Dossche Mills considers constant quality to be of paramount importance and so we do everything possible to guarantee the quality and delivery reliability of your ingredients thanks to close cooperation between our purchasing, production, logistics, quality and development departments.

Unfortunately, all these elements mean that we are once again forced to adjust our prices. We will communicate about this in more detail in the coming days and weeks.

We hope we have provided you with sufficient information and are, of course, fully available to answer any questions you might have.

Team Dossche Mills