Another week of strengthening grain prices as December MATIF contracts push above €292/t and Chicago wheat hits new contract highs for the same position at over US$294/t.
These price levels have never been seen before and they reflect the general turmoil in the market, which is now probably more driven by uncertainty than scarcity.
The critical measure now should not be price per tonne for 2022, but rather overall demand and utilisation levels relative to what had been anticipated.
In both previous price spikes in the noughties and 2010s, markets self-regulated by using high price to ration consumption and to drive production in the following season.
Will it be different this time around? Forward price signals appear good relative to recent years, but input price inflation is acting to make these unattractive to chase.
Indeed, growers everywhere should be asking if cost inflation is best tackled by reducing inputs and output, as this would certainly act to drive prices to where they make production sense.
Tightness in supply continues to be the main driver of prices. Russia’s confirmation of an increased tax rate on exports will further slow supply to global markets.
Fears that demand was slowing due to higher prices were given some relief when Egypt came back into the wheat market recently.
US maize prices also increased last week. Continuing high ethanol production alongside falling stocks also helped prices.
Harvesting is under way in northern and central Australia. A better than anticipated harvest there would add to export potential, especially from Western Australia.
Dry conditions across the Black Sea region and in the US are already adding to production uncertainty for 2022.
Perhaps the greatest supply uncertainty for 2021/22 hinges on the impact of La Niña for South American maize.
Prices here have followed market sentiment to put nearby wheat in the €290 to €295/t bracket this week. Imported wheat and barley are now €300/t-plus and native grain may well go there too. Nearby barley is now €280 to €285/t.
Imported maize is now up to €300/t ex-port for nearby delivery and up to €255/t for November ’22 delivery.
November 2022 wheat has edged up above €240/t with barley also above €230/t. This still leaves a very big price differential between spot and new-crop wheat prices, which must be closed in time.