International grain prices fell towards the end of last week and they have been largely flat this week. They picked up a bit again on Wednesday.
Wheat sentiment has largely moved from neutral to bearish on the back of higher production prospects and a good start to the US harvest. But prices continue to be propped up by continuing uncertainty in maize production.
Maize itself might be regarded as neutral, so any indications of increased production could cause further downward price movement.
Markets wait with bated breath for next week’s USDA report, which will provide the first real estimate of maize acres in the ground in the US.
Maize area focus
Earlier this year, markets were heavily influenced by an unexpected reduction in US maize area and now markets expect that this will be increased.
Some would argue that markets have already priced in an additional 2-2.5 million acres, so alterations of this level of magnitude might not alter market sentiment much.
However, a much smaller area increase, or none, would most likely result in further price escalation, while a much larger increase of around 5m acres could result in further significant price falls.
Whatever the estimated area, from that point forward the market will operate based on the USDA numbers and thereafter the total focus will be on weather and yield potential. This will mean ongoing volatility in sentiment and price.
A cooler and wetter forecast for many parts of the US Midwest put pressure on maize markets last week in anticipation of higher production.
However, this was counterbalanced to some degree by increasing dryness issues towards the northern plains and especially in Iowa, Minnesota, and the Dakotas.
This dryness is affecting spring wheat sentiment, but this is not really a big crop. However, Iowa is a big maize-producing state and problems there could affect overall US production.
There were also weather issues in France where big thunderstorms caused crop damage in parts of the south and resulted in crops being taken out for whole-cropping.
Nearby wheat remains in the €250/t bracket, but up to €260/t has been paid in recent weeks. Barley remains around the €240/t mark.
November wheat is more variable and has been between €212 and €217/t in recent days. However, there is not a lot of market activity taking place.
New-crop barley is generally running at around €10/t below wheat.