High demand dominates the grain market

Canada expects a somewhat smaller harvest than that of 2020, as a result of acreage shrinkage. Photo: Canva
Canada expects a somewhat smaller harvest than that of 2020, as a result of acreage shrinkage. Photo: Canva

Worldwide demand for Wheat is good, but there are restrictions on the supply side. Corn prices are skyrocketing due to significant sales to China and provide additional support for wheat prices.

Wheat future prices have been under slight pressure as a result of the activities of speculators. They are withdrawing from the wheat market and are concentrating on corn and soy. Still, wheat prices in Paris and Chicago held up very reasonably last week. Developments in Russia, which has imposed tougher export taxes for wheat as of March 1, pushed up wheat prices worldwide on the physical market. That effect was already partly discounted in the prices, but it keeps the market very busy.

Europe wheat balance

In addition, Canada expects a somewhat smaller harvest than that of 2020, due to acreage shrinkage. Although the price increases play into the hands of European exporters, there is a risk that exports will overshoot in terms of volume at the current high demand and will disrupt the European wheat balance.

Wheat prices are strongly supported by developments on the corn and soy front. Maize is becoming considerably more expensive, especially in the United States. The price of the March 2021 contract to the Chicago futures market was 30% higher last Friday than at the beginning of December. The United States has recently sold a lot to Chinese customers.

China remains on the market

Moreover, the prognosis is that China will remain firmly on the market. In fiscal year 2020-21, China is expected to consume nearly 250 million tons of grain and rice-based feed and by-products, more than 6% more than the previous year, the US Department of Agriculture reports USDA. This is mainly the result of a recovery in pig production, in combination with a general increase – also in other sectors – in the need for feed.

The primary sector and the government in Ukraine have jointly set maize exports for the current season at a maximum of 24 million tons. The production is 30.1 million tons according to the latest official figures.

Kwakman
Jack Kwakman Freelance journalist
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