The basic laws of supply and demand have begun to bite in grain markets as physical prices rise to secure supplies. This is definitely a ‘current crop’ market, with a possibility that it will spill over into the next marketing year. So markets are watching weather in the southern hemisphere and in South America in particular.

Native prices

Markets are unquestionably firmer here this week, with wheat and barley prices up about €10/t on last week. It would seem that most of the native crop is now sold, or accounted for, and that imports will dominate the market.

Maize continues to rise in price, with imported product quoted at €250/t ex-port this week. This had sold in the €170s/t only six months ago.

This is now reflecting on other grain prices and it is also influenced by soya bean prices. Soya and maize compete for the same land and their relative prices slide either side of a ratio of 2.5:1 in the US.

Frequently, it would be one that would pull up the other, but this time both products are in tight supply and high demand and they are both rising.

This backdrop, plus what appears to be a scarcity of native grain, has pushed nearby wheat up to around €240/t this week and spot barley has jumped the €200/t mark for the first time since February 2019. Indeed, barley, if you had it, could fetch €210/t this week and possibly more if you happened to be in the right place at the right time.

November wheat is around €200 to €205/t, with barley €15 lower at €185 to €190/t.

Looking forward

While there is scope for the market to continue in deficit into next season, that is not the current view of markets. On MATIF, March wheat closed at €235.75/t on Tuesday, but the December price is €201/t – an adjustment of almost €34/t between now and post-harvest.

A similar situation exists for MATIF maize between March and November, with a price difference of €28/t. In both cases, either harvest prices rise or current prices fall, or perhaps some combination of both.

Recent drivers

Russia confirmed its export tax arrangements late last week and these have given some strength to wheat markets.

It is to impose a €25/t tax on wheat exports taking place from 15 February to 1 March and this will then increase to €50/t out to June. It has also placed a €10/t tax on barley and €25/t tax on maize exports.

Meanwhile, recent rain has provided temporary relief to crops in key regions in Argentina, which will help ease crop condition concerns. US market have eased a little in response.