International grain prices suffered a big upset towards the end of last week in anticipation of and in response to the latest World Agricultural Supply and Demand Estimates (WASDE) report in the US.
The report flagged higher supplies of maize and wheat, which triggered a weakening of the markets on Thursday and Friday of last week.
However, sudden reactions are common in futures markets and the price drop stabilised after the weekend and then picked up much of the loss early this week.
The WASDE report put the US maize crop higher than the market was expecting – up 6.3Mt from its August report to a total of 380.9Mt.
However, Chicago maize futures (December 21) were little affected, suggesting that markets had already anticipated the increase.
The report also increased maize production in Argentina on the back of higher planted area. Production in China was also increased by 5.0Mt following good rainfall to support yields there.
The net result of these increases is higher global maize supply and an increase in end-of-season stocks, despite higher demand.
However, reference to the potential risk and impact of another La Niña weather event in South America sounded a note of caution. The risk of drier weather in these countries could seriously affect these production forecasts.
More global wheat
While wheat production was reduced in the US and Canada, bigger crops were indicated for Australia, India, China and the EU27. This resulted in higher total wheat supply and an increase in stock levels in the major exporting countries.
However, global wheat stock levels would still be well down on many previous years and there may still be a tightness in supply of high-quality milling wheats. Many believe that wheat needs to hold a price premium over maize to slow any increase in demand.
Physical prices have remained quite robust in the recent turmoil. Wheat price is back somewhat, having drifted into the €240 to €245/t range, depending on the day.
However, it has not collapsed and current indications suggest it will trade at these levels to the end of this year.
Barley prices are a bit stronger. Nearby barley is now in the €235 to €240/t range out to the end of the year.
Imported maize prices seem to be stronger also, with nearby imports quoted up in the €295 to €300/t range and around €255/t for November.