International wheat futures prices continue to bounce around, with political tension being the biggest single driver of sentiment and price movement.

Nearby futures positions show even more volatility than new-crop positions because of the continuing tightness in supply.

Last week, grain markets looked towards the USDA’s report to give direction to markets. One might argue that the price signals were downwards, but prices increased following the release.

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There had been a lot of focus on the output projections for South America and many believed that the USDA’s crop estimate for the region might have been lower.

Many believe that these estimates will be further reduced in the months ahead.

Brazil’s official forecaster, Conab, has estimated its maize harvest at 112.3Mt, 1.7Mt lower than the USDA estimate.

Tension is the driver

Markets have been up and down many times since that USDA report last week, but this is more the case for wheat than for maize.

Chicago maize futures continue to rise, largely in response to South American production uncertainty.

The main sentiment driver for wheat has been the ebbing and flowing of tensions around the Black Sea and its wider geopolitical ramifications.

Last Friday week, MATIF December wheat closed at €250.20/t. Last Friday, it closed at €257/t. By Monday, it closed just under €260/t as the risk of war escalated once again.

On Tuesday, some of the heat was dissipated when a Russian statement indicated that some troops were returning to barracks following completion of their manoeuvres. Wheat closed on Tuesday at €255.75/t.

Nearby prices were much more affected by the sentiment swings than new-crop prices. It is interesting to note that the gap between March and December MATIF wheat prices has now fallen back to €10 to €14/t, which means less pressure for it to drop suddenly prior to harvest.

Some months ago this difference was closer to €30/t, which signalled the need for substantial adjustment between new- and old-crop prices.

Native prices

Native prices have a slightly stronger tone this week. They show daily variation to follow futures markets, so it is hardly surprising that nearby prices are running in the €300 to €305/t range most weeks. And now nearby barley is the same price as wheat.

Looking out to November, prices are stronger this week with wheat at €255-€260/t and barley €10 lower at €245-€250/t. Imported maize for November remains around €260/t.