Market volatility continues: Grain market daily

• Yesterday, Nov-22 UK feed wheat futures recorded the biggest daily loss since the end-July. The contract lost £7.75/t from Monday’s close, to settle at £285.45/t yesterday.
• Nov-22 Paris rapeseed futures closed at €630.25/t yesterday, down €12.25/t from Monday’s close pressured by the wider oil complex.

On Monday, we saw UK feed wheat futures (Nov-22) close at a near four month high. However, yesterday, the Nov-22 contract lost ground, recording its biggest daily loss in nearly three months. With the war escalating in Ukraine, possible cuts to the Russian export quota and the latest USDA estimates due out today, below we weigh up this week’s market movers.

Black sea exports

The war in Ukraine escalating over the weekend, re-ignited concerns that exports from the country could be hindered. While this led markets to jump up, they came back down yesterday. This was partly on the back of an announcement from Russia’s Deputy Prime Minster yesterday, that Russia could scrap its export quota for the second half of the season.

Russia is expected to produce a record sized wheat crop this season, which will lead to a sizeable exportable surplus. Each season, Russia typically puts in place an export quota, which runs from mid-February to June, to ensure there is enough supply to meet domestic demand.

The export quota hasn’t been scrapped yet and may not be, its currently just in discussion. If Russia keeps the quota, it could be adjusted to take into account the increase in domestic supply. Whether Russia scraps the quota or not, there will likely be more supply of Russian wheat this season due to its bumper crop.

Increased Russian supply could keep weighing on markets, but the ongoing war in Ukraine would continue to limit losses. It is worth noting that how much wheat Russia will be able to export is under question, with insurers and shippers wary.

Today’s WASDE

Markets also came back down yesterday, as investors aligned ahead of today’s highly anticipated USDA World Agricultural Supply and Demand Estimates (WASDE) release. The WASDE is due to be published at 5pm BST.

From a grain’s perspective, all eyes are on any revisions to US maize output. According to a Refinitiv report poll, analysts and trade are expecting US maize yields to be cut. The average yield from the pre-report poll is 4.34t/acre, down from 4.37t/acre in September.

Favourable weather across the US corn belt has allowed harvest to progress well, with 31% of the crop cut as at 9 October, which is just ahead of the five-year average (30%). As well as that, crop condition scores were revised up slightly too, with 54% of the crop now rated as good/excellent, compared with 52% the week before.

While analysts’ expectations are now largely factored into markets, if the WASDE brings any large changes we could see markets react accordingly. It will also be interesting to see what the USDA have global demand pegged at, with recessionary fears looming. Again, any surprises here could also influence market movements.

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