The sentiment in grain futures markets reversed again last week, with gains evident in major markets. This happened despite the USDA increasing its US maize production forecast for 2020 by 7mt, to 388mt. The main driver was a severe storm which destroyed maize crops and silos in Iowa, USA.

Big storm

Iowa is the most intensive maize growing state in the US and it normally accounts for around 18% of US production. The storm destroyed a 700-mile swath of crops and virtually all the maize in its path was destroyed. This caused the Chicago December 2020 maize futures price to hit its highest price for a month and lifted prices in other markets also. It spilled over into wheat also and MATIF December closed up €2/t last Friday from the previous Friday.

However, this sentiment change should not be taken as permanent. While there were many stores damaged, this grain can be cleaned up again for use. Assessments suggest a likely nett production loss of 1.0-1.1 million bushels (25,000 to 28,000t). While the actual crop lost will be more than that, it is estimated that the associated rains will increase the yields of crops in the greater region.

While 1m bushels may sound like a lot, the current estimate of the US maize crop is 15.2 billion bushels (388mt). So, this is unlikely to have a long-term impact but it is adding to nervousness and is hugely significant for the growers affected.

Wheat

There continue to be mixed messages on global wheat production. Recent USDA figures reduced wheat production in the EU by 4mt and in Argentina by 0.5mt but increased production in Russia, the US, Brazil, and Ukraine. The nett impact of these adjustments saw wheat ending stocks increased.

Poor wheat yields in France and southeast Europe have led one agency to further reduce EU production to 128mt (13% below 2019). But yields in other parts of the EU are reported to be good.

The AHDB report Russia’s wheat harvest to be 57% complete with continuing good yields. This has led IKAR to add a further 1.0mt to its crop forecast, which now stands at 82.0mt.

Native prices

Native prices remain largely unchanged but there is little selling taking place to verify values. Near-by wheat remains around €190-€194/t, depending on the position, with barley still around €170/t.

November prices are broadly similar at this point, with wheat at €192 to €194/t and barley at €170-€172/t. Some merchants have already paid €150/t for green barley.