Market sentiment continues broadly negative and the main futures indicators continued to weaken over the past week. The major driver has once again been supply, as concern continues over demand and the uncertainty that the COVID-19 pandemic brings globally.

Larger wheat harvests are expected from Russia, Australia and Canada and these are weighing heavily on global production and prices. This is despite the fact that wheat production in France is currently estimated to be down 25% on last year.

Still more wheat

Russian officials increased the country’s official wheat area a few weeks ago and this led to the knock-on consequence of higher output. A week later they increased the projected yield because of higher than expected harvest yields. This week they increased the average yield again. These three increases have added 4.5mt to its projected output, which is now put at 81mt of wheat. However, there is still some concern over its spring wheat crop.

Yield projections for maize in the US remain high

The Canadians are also now expecting a record wheat crop this year, adding further to price pressure. This is estimated at close to 39mt, well above its 37.6mt record set in 2013.

Yield projections for maize in the US remain high. As the season progresses more of the total crop is falling into the ‘good’ to ‘very good’ categories for crop condition which has been a reliable indication of yield potential.

Focus on demand levels

Paris milling wheat (MATIF Dec-20) futures closed last Friday at €180.25 and closed on Tuesday €177.25/t. As time goes by it will be more difficult to get news that will support prices. Demand is now an important factor for wheat – will it increase or decrease as the pandemic continues. The same question applies for feed.

It is good to hear that China has come back into the market for maize, having used up the bulk of its historic stocks. This demand may, in time, help feed grain prices.

It is also interesting to note that ethanol production in the US continues to climb and is now close to what might be regarded as the expected usage level.

Physical markets holding

While futures markets are weaker, physical markets globally remain steady. This is mainly due to lack of selling.

Native prices are broadly similar to a week ago. Near-by wheat has become a new-crop market, priced at €190 to €193/t, but for someone still needing old-crop this would still be above €200/t. Barley remains around €170/t.

Looking towards November, wheat remains in the €191 to €194/t bracket, with barley at €170 to €172/t.