Global maize balance supporting grain price: Grain market daily

• UK Nov-22 feed wheat futures closed at £267.50/t yesterday, down £3.85/t from Friday’s close. The Nov-23 contract was down £1.05/t over the same period settling at £244.55/t yesterday.
• Paris rapeseed futures (Nov-22) closed yesterday at €632.25/t, down €24.00/t from Friday’s close. The Nov-23 contract was down €19.50/t, closing at €623.25/t.
• Rapeseed markets fell yesterday, following the trend of soyabean markets. Chicago soyabeans (Nov-22) closed at $518.86/t yesterday, down $15.43/t from Friday’s close. The drop in soyabean markets was caused by an improved US weather outlook, lower crude oil prices, as well as lower demand from China. The fall in Chinese demand results from a cut in Chinese interest rates in response to weak economic growth (Refinitiv).

As mentioned in yesterday’s Market Report, on Friday, in its latest World Agricultural Supply and Demand Estimates (WASDE), the USDA trimmed global maize production for 2022/23 by 6.3Mt from July's estimate, to 1,179.6Mt. This is on account of smaller EU and US crops, despite larger Ukrainian and Russian crops forecasted month-on-month. In the US specifically, harvested area and yield forecasts were both reduced.

With global demand expected to remain relatively stable and exports forecast to rise slightly, ending stocks have been trimmed to 306.7Mt. This is the second lowest level in eight years, behind 2020/21. The 2020/21 season saw ending stocks of 292.9Mt.

Why does global supply look tighter?

Hot and dry weather across the northern hemisphere has been a key factor for a tightening maize supply picture.

The US, the largest global maize exporter, has been experiencing dry weather during the critical maize development months. Yesterday, US maize conditions were reduced by a further 1 percentage point on the week to 57% ‘good’ to ‘excellent’ ratings by the USDA, in data to 14 August. In the same data period, 62% of maize is reportedly at the dough stage and 16% has dented.

The EU too has suffered severe heat. The USDA lowered their outlook for EU maize production by 8.0Mt in the latest WASDE, down to dryness in Romania, Hungary, France, Italy, Spain, Slovakia, Bulgaria, and Germany. Though in a release last week, Stratégie Grains trimmed EU maize production 10.0Mt from last month, to 55.4Mt, due to recent hot weather during pollination. Is there room for a further trim to USDA forecasts?

Ukraine too is a key factor in a tighter maize outlook this season. The USDA peg the maize crop at 30.0Mt for 2022/23. This is up from last month on timely July rains, though back 12.1Mt from last season, due to the ongoing conflict with Russia. Ukrainian consultancy UkrAgroConsult have pegged Ukrainian maize production lower than the USDA, at 25.7Mt for 2022/23 in their August forecast. Despite lower output this year, larger carry-in stocks have led to UkrAgroConsult forecasting maize exports 4.7Mt higher than last season at 29.7Mt. With ships continuing to leave Ukrainian ports, the speed and availability of exports from Ukraine will be a factor driving the market.

What could this mean for grain prices going forward?

With maize acting as the ‘price floor’ for grains, a tighter maize supply balance looks to provide wider support across the global grains markets. With a supported global maize price, we could see domestic focus move to feed wheat as an alternative grain for animal feed and bioethanol use.

As we move towards September and October, when maize harvest starts in the US and EU, more information will bring light on supply. Though until then, markets will be reactive to weather and any new news. Rain is forecasted across the US maize belt and eastern states over the coming week, which could alleviate some of the concerns around crop quality. Furthermore, with Ukrainian grain moving again, this keeps a cap on future gains on maize prices.

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