Futures grain markets weakened further last week, with prices down on both sides of the Atlantic. However, physical prices seem to be holding, at least for the moment. The futures sentiment is largely driven by recent rain in the main exporting regions.

While futures markets trade news, information and weather, physical markets are a bit more resilient. Physical markets have not followed futures prices down and remain broadly similar to last week, as buyers work to secure supplies.

Rain eases supply fears

Rain over the past week in key wheat exporting regions, such as the US, South America and the Black Sea, eased production concerns for new crop for the time being. However, the quantity of rain is insufficient for the longer term and so more rain will be necessary.

Prior to the rains, the condition of winter wheat planted in the US was described as the second-worst ratings at the start of the season for 25 years. But it is still early days and a level of yield recovery is still possible with kind weather.

Maize production down

Rainfall across parts of the US and Brazil also led to maize prices weakening last week. This is especially critical in Brazil, where rains enabled soya bean planting and this is critical for the timely sowing of the safrinha maize crops which follows it. However, import demand from China continues to offer price support.

While total production is still high at 1.156 billion tonnes, consumption is estimated to be higher, leading to an 18mt reduction in stocks

It must be noted that global maize production was lowered by the International Grains Council (IGC) last week. It reduced global maize production by 4mt for 2020/21 to reflect the dry conditions in the US, Ukraine and EU. While total production is still high at 1.156 billion tonnes, consumption is estimated to be higher, leading to an 18mt reduction in stocks.

The IGC global wheat production estimate was increased by 1mt to 746mt, but consumption was also increased by 2mt.

Native prices

While the general tone of the local market is somewhat weaker, prices continue to hold at last week’s levels. The spot market is largely supplied and any forced sales will suffer a discount relative to new year prices.

Nearby barley remains in the €187 to €192/t bracket

Nearby wheat is currently in the €212 to €215/t range, depending on location and contract timing, but the higher end of these prices is now more likely for 2021 deals. Nearby barley remains in the €187 to €192/t bracket, with the higher end of the range also more likely into the new year.

Prices for May might be €1-€2/t above the higher end of these ranges, but forward selling for this timing is difficult, as buyers hope that maize prices will fall to ease all price expectations.