Posted on January, 29, 2024 at 06:14 am
The month of January has seen significant pressure for global grain markets with both wheat and maize prices tumbling down. So far in January UK feed wheat futures (May-24) have dropped 6.3%, closing yesterday at £182.40 /t, a new contract low. Even today the contract is trading even lower, around £180.00/t as at 13:00, as sterling is trading stronger against both the euro and US dollar.
There is an array of things that have been pressuring the global grain markets. These include very competitive Black Sea grain supplies, fairly benign global weather, and a strong euro against the US dollar, which was dampening EU export competitiveness until recently. Over the last two weeks the euro has weakened 1.1% against the US dollar closing yesterday at €1 = $1.0846 (LSEG). A weaker euro will help EU competitiveness on the global export market, which in turn could lend some support to European grain prices.
The latest USDA World Agricultural Supply and Demand Estimates confirmed a bearish sentiment for maize markets. The report showed that global maize stocks at the end of this season (2023/24) are expected to reach a six-year high of 325.2 Mt. Between now and harvest-24 the main market driver is going to be the second (Safrinha) maize crop from Brazil.
As the soyabean harvest progresses in Brazil, the second maize crop will be planted between January and March. As at 20 January 5.0% of the crop was planted, up from 0.9% at the same point last year. The faster progression reflects the early start to the soyabean harvest from the hot weather in recent months. This maize crop is currently forecast to be 91.2 Mt, the second highest ever (Conab).
Global markets are relying on this maize to plug the supply gap between now and the Autumn of 2024. Issues with this crop could relieve the downward pressure on wheat. But, if this crop goes into the ground without any weather issues, high global maize supplies could continue to bring pressure on global wheat markets.
Source: AHDB