Grain prices: futures weaken but farm prices are up

Wheat and maize took different directions on US markets last week. In general, maize futures prices strengthened, but they have softened slightly again this week. Wheat futures prices fell on the Chicago market over the past week, but they held largely firm on MATIF. However, they appear to be softening again this week, as sentiment reflects increased confidence in over-supply.

The Chicago market reflected the fact that global wheat supplies look increasingly comfortable, plus a strengthening in the US dollar. Revised Canadian crop production estimates put wheat production down 1.6mt on last month, but the new 34.1mt wheat production estimate is still up 5.6% on this year.

Russian wheat production was also upgraded by SovEcon, to add 0.7mt to its wheat production forecast following better than expected production results from Siberia. Down under, Australia has also seen government production estimates for wheat and barley increased following recent rain.

Maize markets

Concern continues as to global production of maize. While global demand will be more than met, the size of the surplus remains uncertain. Last week, the USDA cut its forecast maize production by 9.6mt due to the combination of dry weather and recent storm damage. This also meant a reduction in US and global stocks. While excess production is still likely, the oversupply is much reduced and prices are generally stronger.

Demand from China for US maize and soya beans is helping. This additional demand is supporting physical prices and should help general sentiment in time. However, the forecast stronger demand for US maize exports is more than offset by a falloff in US domestic maize usage. This is partly a result of decreased ethanol production and partly due to the unpredictable impact of the coronavirus pandemic.

Native prices

Prices here have benefited from the stronger physical sentiment due to the lack of sellers and the fact that harvest pressure is now behind us. All prices are up somewhat this week, with nearby wheat now around €197-€198/t and barley at €177-€178/t. Current price suggestions indicate November prices at around €200/t for wheat and €180/t for barley.

With the harvest now virtually complete, it seems likely that the national crop will exceed the 1.8mt estimate from earlier in the summer, but it may not hit 2mt, largely due to lower wheat production. While most buyers will not have set their formal prices yet, the indication from some of them is for a green price of around €150/t for barley, but wheat is less certain.