Futures grain prices weakened further last week. Nearby prices fell further, which is reducing the differential between nearby and new-crop positions to around €30/t on MATIF.
Having been flat for many days, prices picked up again on Tuesday on the back of production concerns for wheat and maize in 2022.
Not much has changed in the past week other than futures prices. Fluctuating sentiment and fund positioning have altered prices, but physical prices remain strong, although down a little from their peak.
There are probably two main factors here – a lack of bullish news to drive markets up and increasing concerns around the escalating omicron COVID variant and its potential implications for overall demand.
However, the weakening markets stabilised last weekend when China came back to the market to purchase French feed wheat and barley.
A few weeks ago, Russia was reportedly set to increase its wheat export limit to 9Mt from 15 February to end of June 2022. Now the word is that it is considering going back to its initial export limit of 8.0Mt.
However, this is still bigger than normal export levels during this period, according to a recent AHDB report, so its impact may be limited.
Wheat production in 2022 is currently being challenged by dry conditions in US winter wheat crops and the risk of frost in the Black Sea region. Soft wheat production in the EU is also forecast to be down 2% to 3% for next harvest.
The AHDB also reports that Argentina will limit its exports of wheat and maize for the rest of this season to try to curb high domestic inflation rates.
Maize is back in the mix as a potential market driver too. It seems that La Niña is beginning to bite at the maize crop in Brazil and all crops in Argentina.
Physical prices are a bit weaker this week on the back of the ongoing weakening in futures markets.
That said, nearby wheat is still up in the €303/t to €305/t bracket and barley around €300/t to €302/t. With markets picking up again early in the week, it is possible that these prices may strengthen again also.
New-crop price offers for November 2022 are actually a bit stronger, despite the weakening in nearby prices. Wheat is now on the upper side of previous ranges at around €250/t, depending on the day, with barley around €240/t.
Meanwhile, oilseed rape prices have benefited from another bounce in soya bean prices, which see soya bean meal ex-port up at €470/t again.