Having been relatively quite for the first few days of last week, new-crop December wheat prices went on another price surge on Wednesday, Thursday and then Friday to close above €410/t.
Indeed, the MATIF contract for December closed at €407.50/t last Thursday and then rose as high as €418/t during Friday trading. This followed the release of the most recent WASDE (world agricultural supply and demand estimates) report on Thursday evening.
This report indicated smaller numbers for US hard and soft red winter wheat production, down 8% on last year, and this further added to existing wheat supply pressure for 2022/23.
On Friday 6 May MATIF December wheat closed at €390.50/t and one week later it closed at over €410.75/t, all in three days.
Old versus ‘new’ crop
With the May contracts now finished, the closest contract position on MATIF is September 2022. This position also increased over the past week but it is of interest to note that the gap between the two positions is now around €6/t - €410.75/t for December versus €416.50/t for September. A few weeks ago the gap on the futures market between December and nearby was closer to €90/t.
While the harvest in Europe is still nearly a month away, this price gap now represents a very small difference between old and new crop wheat. I take this to mean that the market still sees global wheat supply to be very tight, leaving the price transition from old crop to new crop small and very highly priced.
Maize up too but not as much
Having seen Chicago maize prices fall back slightly since the start of May, Chicago picked up again on Thursday last and even more on Friday.
The Chicago December 2022 maize or corn price had been on an upward price trend since mid August 2020 and only began to level off in the second half of April 2022. There was a little bit of weakening then for a few days before it picked up again in the middle of last week.
Maize in Europe also rose last week with the MATIF December contract having closed at €344.50/t on Friday 6 May and at €361.75/t on Friday 13 May. This relatively big price differential between maize and wheat is once again forcing businesses to look towards imported maize as the banker for feed production.
While imported maize has been competitive with wheat and barley for weeks now, buyers may not wish to commit to too much forward maize in case prices weaken. But it looks less like this will happen with every passing week and while imported maize for next autumn is expensive, it is becoming increasingly better value than barley or wheat.
Concern for native grain demand post-harvest
This could once again present the risk that demand for native wheat and barley could wane considerably post-harvest as large users continue to buy maize forward. When this happened in the past it became very difficult to actually sell native grain and this could happen again this year.
This realisation is beginning to bite and in some recent quotes the differential between wheat and barley seems to be increasing in an effort to keep barley price closer to maize. The market had been operating on a traditional €10/t price differential but there is now increasing talk about €15/t to try to enhance its competitiveness and demand.