The past week has seen futures grain prices strengthen further for new-crop positions. December MATIF wheat closed last week at €374.75/t ahead of our bank holiday weekend.

This dropped back to €371.25/t on Monday and it closed at the same price on Tuesday.

So, some ups and some downs, but still higher than the previous Tuesday where it closed at €367.25/t.

Nearby contract positions are much lower though, closing last Tuesday at €390.75/t having been up around €420/t recently.

However, physical markets are holding, but demand would appear to be easing in response to price.

Supply not guaranteed

While supply sentiment is leaving markets feeling strong for now, there is always a risk that early harvest yields come in above expectations to alter the overall supply perspective.

With US wheat among the first to come under the knife, if that were to yield above expectations, the market would begin to ask different questions.

While existing reports make this unlikely, a higher performance would question sentiment for the remainder of the season.

The second major factor in price is demand. If demand falls below supply, prices will begin to adjust to ensure utilisation. For the moment, market balance seems very tight, but if high prices appear to erode demand, supply could move into surplus in the marketplace.

Current drivers

Rain continues to delay spring wheat and maize planting in the US, with progress well behind last season and average levels.

This may have yield implications, but it is still far too early to be a real issue.

Winter wheat crop conditions in the US continue to disappoint and this is supporting prices. The AHDB reports a similar situation in India, where wheat yield potential has been trimmed by 6% due to high temperatures.

Native prices

Nearby sentiment is slightly weaker than last week, but physical prices are holding. Wheat remains in the €420 to €425/t bracket, with barley back up in the same price range.

New-crop prices are up about €5/t, with wheat for November now in the €375 to €380/t bracket and barley around €365 to €370/t.

Meanwhile, oilseed rape futures have weakened from a high of over €850/t in recent weeks to close on Tuesday last at €804.50/t because of higher output expectations from the European crop. This gave rise to green crop offers for harvest of €736/t.