International wheat prices had a relatively flat week, while maize prices continued to strengthen. Markets continued to have a moderately bullish tone, with poll predictions indicating that this week’s World Agricultural Supply and Demand Estimates (WASDE) would show even tighter US and global stocks.
Well, it did not, and this has weakened sentiment once again. There is a saying in the market that “bulls need feeding”, but they got nothing from this report.
The supply and demand outlook for the current year is largely unchanged for wheat this month. This suggests greater supplies, increased consumption, higher exports, and lower end of season stocks.
Global production is estimated at a record 773.4mt and consumption is raised to 769.3mt. The report projects global ending stocks for wheat at 304.2mt.
Global coarse grain production is up marginally to 1,438.9mt, with consumption down slightly, leaving higher ending stocks. The numbers include higher maize imports for China, which also imported more barley and sorghum, thus bringing its total coarse grain imports to an estimated 40.3mt. Global maize ending stocks are up 2.7 million from last month to 286.5mt.
Following its imposition of export taxes on wheat from February through to June, Russia announced last week that it will introduce a formula-based export tax from 2 June.
The AHDB reports that it is to be calculated at 70% of the difference between the base price of wheat and $200/t. This means the tax will automatically increase as prices rise.
Exports of wheat from Russia were ramped up in the past week ahead of the introduction of export taxes this month.
Brazil still expects to have a big crop for the coming season, despite planting and harvest delays. The US expects a rebound in maize production in 2021, with the return of abandoned acres and some level of switch from wheat.
While prices have been rocked about in recent days, it seems likely that spot prices for old crop will hold steady, with wheat around €240/t and barley at €210/t.
However, this may change depending on where the market settles following the impact of the recent WASDE report.
That said, new-crop prices may be more affected by the uncertainty around increased output projections for the coming harvest.
Early indications are that November wheat is weaker at €198 to €200/t, as is barley at €186 to €190/t.