While physical price offers do not follow futures price markets euro for euro, they travel in the same direction, which was upwards over the past week.
But prices are now so high, that it is difficult to say that there is a real market.
On Wednesday of last week, the MATIF December futures price closed at €396.75/t – this was sub-€300/t at the end of February.
By Friday, this had moved up to €410.75/t, on Monday of this week that same contract price closed at €433/t and on Tuesday it was €431.75/t.
One cannot but get the feeling that there is far too much heat in this market.
Supply is certainly tight against anticipated demand, but will some of this demand be killed by high prices? And if it is, when might prices readjust and who will own the grain at that point in time?
After all, there are almost 600Mt of grain stocks globally, at least half of which is considered to be available to trade.
The most recent price drivers hinged around the United States Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) last week, the first one to indicate potential outlook for the 2022/23 season.
It concluded that global supply versus demand would be very tight, especially for wheat.
The report suggested that lower production in Australia (-6.3Mt), Ukraine (-11.5Mt) and Morocco (-5.3Mt) would be greater than the projected increases in Russia (+4.8Mt), Canada (+11.3Mt) and the US (+2.3Mt).
The report also forecast a tight outlook for maize to further reduce closing stocks.
The WASDE forecast reduced production in Ukraine (-22.6Mt), the US (-16.6Mt), the EU (-2.2Mt) and China (-1.6Mt), with limited increases forecast for Brazil (+10.0Mt), Argentina (+2.0Mt) and South Africa (+1.0Mt).
India also featured strongly in grain markets over the past week or two due to the impact of March heat on production.
Then, last weekend, it banned wheat grain exports to help protect internal supply.
Prices here have reacted to these price moves with high daily and hourly volatility.
Nearby price offers varied between €420/t and €440/t for wheat and barley.
New-crop prices have also been very variable and unpredictable because of lack of buyers who are afraid to lock in at these high prices.
Wheat has been in the €415 to €420/t range in recent days, but yesterday’s price is history and tomorrow’s a mystery.
New-crop barley has been in the €395 to €400/t range.