Higher global wheat prices widen the gap over maize: Grain market daily

• UK feed wheat futures (Nov-24) closed yesterday at £188.80/t, up £0.55/t from Monday’s close. The May-25 contract rose £0.20/t over the same period, ending the session at £202.95/t.
• The UK futures tracked Chicago wheat and Paris milling wheat futures which were both up yesterday. Support for prices came from an attack on a grain port in Ukraine and weather risks in Russia, which helps to ease the pressure from higher Black Sea exports. The commodity market is looking ahead to the USDA’s World Agricultural Supply and Demand Estimates (WASDE) due out on Friday.
• Paris rapeseed futures (Nov-24) ended yesterday at €484.50/t, down €6.00/t from Monday’s close. The May-25 contract closed at €492.75/t, also down €6.50/t over the session.
• European rapeseed prices followed crude oil and soyabeans futures down yesterday. Harvest pressure from the US and forecasts of beneficial rains in Brazil weighed on prices.

A major indicator in grain markets is the spread between wheat and maize prices. Recently, global wheat prices have risen to levels not seen since mid-June. On 2 October, Chicago wheat futures (Dec-24) rose 14.7% to $226.1/t, up from an all-time low of $192.9/t on 26 August. During the same period, Chicago maize futures (Dec-24) rose more slowly, by 18.11/t. This expanded the spread by $15.1/t, from $40.7/t to $55.8/t.

The surge in wheat prices was driven by a mix of factors, including ongoing droughts in key producing countries, export restrictions, geopolitical tension in Ukraine and the Middle East, and higher global demand.

As at yesterday’s close, Dec-24 Chicago wheat and Dec-24 Chicago maize futures settled at $218.5/t and $165.6/t respectively. However, the spread remains at $52.9/t, which is $9.3/t higher than this time last year.

Can the spread widen further?

At the moment, a combination of weather risks and robust global demand is supporting wheat prices. However, competitive exports from the Black Sea have long capped price rises. Weather forecasts indicate a dry week ahead in the Russian and US winter wheat belts, while heavy rain is expected France.

The USDA’s World Agricultural Supply and Demand Estimates (WASDE) is set to be released this Friday, 11 October. This report will provide insights into global production forecasts, consumption, and trade. Any significant information from the report could influence market sentiment and prices moving forward. Something to closely monitor as markets adjust ahead of the report.

Has the spread reached a Limit?

The current market uncertainties make it difficult to predict whether the spread has reached its limit. In the past, the price gap between Dec-24 Chicago wheat and maize futures has risen above $90/t. However, since both grains can be used interchangeably in many ways, this often helps to regulate the spread, allowing buyers to switch based on price.

Impact on UK feed demand

The UK feed industry tracks movements between wheat and maize prices to optimize feed formulation. A higher premium for wheat over maize could lead to increased demand for maize as a substitute in animal feed.

Looking ahead, the harsh realities of adverse weather could lead to further cuts in wheat production estimates in key producing countries, potentially widening the gap.

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