Two major bits of news dominated grain markets over the past week. At the end of last week, the talk of a tax on exports from Russia had a negative impact, but markets picked up again this week following publication of the US world agricultural supply and demand estimates (WASDE), which forecast lower global stocks.

The WASDE report further reduced its estimates of global residual stock levels at the end of this 2020-21 marketing year for wheat, maize and soya beans.

The initial price reaction on maize was downwards, because the market had expected a bigger stock cut on maize (and soya beans).

One of the main surprises in the numbers relates to the apparently small reduction in the maize and soya bean production forecasts for South America, given the impact of the dry weather there.

Market influences

The USDA numbers cut maize and soya bean production in Argentina by 1.0mt each, but made no alteration to its Brazilian production estimates.

This was surprising given that Conab cut its forecast for Brazilian by 2.3mt since then. It also reduced Brazil’s soya bean production forecast by 0.5mt.

There is little doubt but that production in South American countries will remain very important for price direction in the months ahead. The overall impact on wheat markets was strong. Sentiment was also helped by high export volumes from France and low estimated closing stocks there too.

In Russia, politicians are considering the introduction of a 2,000-ruble-per-tonne export levy (€22.45/t) on wheat from February, according to the AHDB. They also report that a levy has already been placed on sunflower exports.

Native prices

Native prices would appear to be somewhat stronger again this week. Buyers are availing of the weaker days in the market to purchase stock for the months ahead.

Imported maize has weakened from its highs of €227/t to be down to €210/t ex-port at the end of last week. It has since climbed back up to €214/t, but this price level makes wheat less attractive.

Nearby wheat is priced at €220 to €225/t over the next few months, depending on the position and the day. Barley remains closer to €195/t, with uncertainty still due to Brexit.

There is little interest reported in forward purchases out to May, due to the general market uncertainty and the gap between current and new-crop futures prices, which will have to narrow at some point.

November wheat is currently put at around €190 to €195/t, which is up on last week, while barley is broadly similar at €180 to €182/t.