The grain market seems to be recovering, after a set price drop. The focus is on wheat as Russia is about to impose export tariffs on that crop, knowing that the 2021 harvest will be disappointing.
Wheat prices on the futures markets in both Paris and Chicago clearly rebounded last week. On Friday, the March contracts reached their highest level since the end of November.
The upward trend started on both futures markets in the second half of the week. The price increase for corn was more limited.
The main driver of the wheat forward price is the message that Russia wants to impose export duties on wheat. According to agency Agritel, the rates are around 2,000 roubles per ton (approximately US$ 27.44). The tax should be paid by the primary sector and aims to prevent inflation of agricultural products (to avoid raising domestic prices, that is). Russia has already put a brake on unbridled wheat exports by setting a cap of 17.5 million tonnes for the period from mid-February to June. How much the issue will continue to affect the grain market remains to be seen, so far it has been limited to hectic futures.
Another aspect of the developments in Russia will certainly be just as important: the forecast for the wheat harvest in 2021 has been lowered by more than 5% to 76.8 million tonnes by market agency SovEcon. It is 10% less than this year’s crop. It indicates how strong the influence of the drought in recent months has been on the level of the winter crop. In its monthly Wasde report on agricultural markets, the U.S. Department of Agriculture downgraded closing stocks for the 2021 crop.
On the physical market, trade is somewhat calmer; this is normal for this time of the year. The extent to which China continues to import grain and soy still very much determines the sentiment. For 2021, further growth is foreseen in the Chinese consumption of wheat, for both human food and animal feed.