Grain prices remain in a state of unease, which is not unusual for this time of year. But this year they are untypically continuing to track upwards.

The MATIF futures market, which has tended to be our main guide to price direction in Europe, has increased from around €178/t at the start of August, with some blips, to close on Thursday 1 October at €197/t.

It weakened slightly on Friday, but picked up some of the loss before closing.

The increase has been gradual and the trend is also being reflected in physical prices (see graph).

Native physical prices for November have held above the MATIF value and, while the lines are not parallel, they are broadly similar in direction.

Jump in MATIF prices

MATIF took a big jump during this week, which arguably takes it back on to the line it has been travelling since early August.

Given the fact that overall global production is still in surplus, and especially for wheat, it is unusual to have prices rising at this time, with the huge US maize harvest ongoing.

Globally, it is expected that maize production (the single biggest crop) will be in deficit, while wheat production will be in surplus, relative to demand or consumption.

Global production

Indeed, the global wheat production surplus is currently estimated at 15mt, so why would prices be rising?

Well, maize in is deficit, so the biggest price dampener is effectively silenced, even though maize prices are still low in the US.

But on wheat itself, I reckon that the big midweek surge was driven by the news that Russia may constrain its wheat exports in the new year.

With Russia now the biggest wheat exporter, this suggestion would unease the international trade business, leaving traders more anxious to secure supplies.

Having more wheat used in Russia and less exported would also decrease the end-of-season carryover.

A second issue is the growing concern around current dry conditions in central Europe and South America.

The latter will mainly affect maize and soya production, but the issue in Europe concerns wheat planting.

The dryness in central Europe continues to delay winter wheat planting because it is just too dry for germination.

This could decrease supply for next year by causing a switch in land use. Countries such as Ukraine and Russia do not have nearly as much flexibility on planting time as we have due to the inevitability of frost.

Asian trade

It must also be said that increasing trade levels to southeast Asia are helping to underpin current sentiment.

However, there will still be an expectation of a very significant increase in wheat production in the EU for the coming season due to the expected increase in winter plantings.

But, in the meantime, there is scope for prices over the next seven months to be higher than had been expected some months ago. However, COVID-19 remains a concern for all markets.

Back home, it is thought that Dairygold may discuss and possibly finalise its green grain prices in the coming week, with Glanbia likely to do the same in the following week.