International grain prices saw further upward movement over the past week, especially at the end of last week.
Historical highs have since been suggested as the reason for subsequent fund selling which saw prices weaken slightly early this week. But the impact of this on physical prices was relatively low.
The ongoing tight global supply for wheat continues to support prices, which continue to reach historical highs.
Pressure on wheat supply
Last week’s price surge was primarily a result of the downgrading of India’s wheat crop. This was a result of the very high temperatures in March which were negative for yield.
Official Indian government forecasts now put its crop at 105.6Mt, as lower yield estimates reduced expected wheat output by 6.3Mt. This obviously affects their ability to export wheat and thus tightens supply to the global market.
France has become a concern too in recent weeks as very hot and dry weather threatens its production. Arvalis (the French technical institute) suggests that current weather, which was preceded by months of insufficient rainfall, seems likely to cause significant damage to grain crops at flowering.
Meanwhile, Russia continues to export wheat despite its export cap, which is now unlikely to be reached.
Weather issues remain in other regions also. Maize and soya planting continue to be delayed in the US but this may be about to change. While rain seems set to continue, dry periods may provide planting windows, especially for maize.
Conditions remain warm and dry across much of the Safrinha maize region in Brazil, but this is still more of a concern than a real issue for now.
Last year’s poor growing season in Canada left stock levels of wheat, barley and oats much lower than the previous year because of the severe drought.
Prices continue to strengthen but imported maize continues to provide better value in the market and the trade is taking cover on this crop.
With overall demand uncertain due to high prices, we could be heading into a year when native feed grains will be pushed out of rations due to cheaper imports.
If native feed grains continue to follow milling wheat upwards, they could be uncompetitive in an import-dominated market.
Nearby wheat continues in the €420/t to €425/t range, despite a weakening in nearby futures positions, but barley is lower at €415 to €420/t as it strives to compete with maize.
New crop wheat has now pushed up in to the €390 to €395/t range, with barley at €375 to €380/t.