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Grain prices rise amid export curbs: Grain market daily
Tuesday, 19 January 2021
Market commentary
- European wheat prices jumped up again yesterday as the confirmation of higher Russian export taxes (below) sunk in. European exports are likely to benefit if Russian exports fall.
- The US markets were closed yesterday due to a public holiday.
- UK feed wheat futures for May-21 futures gained £3.95/t to £214.40/t, while the new crop (Nov-21) rose £2.95/t to £171.40/t. All current contracts recorded their highest prices yet.
Grain prices rise amid export curbs
Wheat futures prices jumped up again yesterday after the confirmation of higher Russian export taxes on Friday.
The goal of the taxes is to reduce domestic prices. Historical caps or taxes have been mainly in relation to small crops; this tax is also about the fallout of the coronavirus pandemic and recession.
The new tax on wheat is high enough that it could limit exports of wheat from Russia this season. Yesterday, IKAR, a Russian consultancy, reduced its forecast for Russian wheat exports by 1.0Mt to 37.5Mt. The USDA forecast exports at 39.0Mt.
In addition, there are proposals to introduce a ‘floating’ tax from 1 July. If this is confirmed, next season’s trade could be impacted too.
- Wheat: export tax of €25/t from 15 – 28 February and then €50/t from 1 March – 30 June. A floating export tax may apply from 1 July onwards but this has yet to be confirmed.
- Maize: export tax of €25/t from 15 March – 30 June
- Barley: export tax of €25/t from 15 March – 30 June
In addition, a maximum of 17.5Mt of wheat, meslin, barley, maize and rye can be exported from 15 Feb to 30 June.
There are also rumours about possible limits on maize exports from Ukraine and an uncertain situation in Argentina. Both these countries are also feeling the economic effects of the pandemic. Ukraine harvested 29.5Mt of maize in 2020/21, 18% less than the year before, while dry weather means yields are uncertain in Argentina.
Ukraine may limit exports of maize this season. The livestock industry has out forward a proposal and the economy Ministry will make its decision on that on 25 January (Refinitiv).
A cap of 22.0Mt is being mooted. This would be 2.0Mt less than the current forecast by the USDA.
Another proposal was also put forward in November, but not implemented.
On 30 December, Argentina temporarily banned maize exports to try and limit domestic price rises. The ban contributed to a rapid rise in global maize prices.
The ban was changed to a daily limit (30Kt) 12 days later, following objections from industry and farmers. However, that too was removed on Friday.
For now, the Argentinian government will be monitoring the export pace and industry meetings continue. The goal of these meetings is to find a way to cushion the impact of higher global prices on Argentina’s population. Therefore, it’s still possible that new measure will be introduced to control exports.
What this means for the UK
Where global prices lead, UK prices are likely to follow.
The drivers of the current rally in global grain prices include high demand, including from China, and worries about supplies. However, political interventions and worries about them are adding to the rally.
If other countries follow Russia and implement measures to curb exports, global grain prices are likely to rise.
Export curbs limit supplies for importing countries, pushing up global prices in the short term. Longer-term, the effect of the restrictions will be important. If there are greater carry-over stocks, it will boost availability next season and could mean pressure on forward prices – depending on crop sizes.
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