What’s driving markets this week? Grain market daily

• At £239.50/t, May-23 UK feed wheat futures closed at the highest level in over four weeks yesterday, gaining £3.60/t from Monday’s close. The Nov-23 contract closed at £232.25/t, up £2.15/t over the same period. Read more on what has been driving prices below.
• May-23 Paris rapeseed futures settled at €553.50/t yesterday, up €3.75/t from Monday’s close, with support coming from the wider oil complex.

So far this week, UK feed wheat futures have continued to be supported somewhat, with the May-23 contract closing up for the fourth consecutive session yesterday and the highest price in a month at £239.50/t.

So, what’s driving the support this week and could it continue?

Strong EU wheat export campaign

UK feed wheat futures have followed upward movements to Paris milling wheat futures, which have been supported of late by stronger demand for EU origin wheat. Over recent weeks, if not months, extremely competitive Russian wheat has been dominating the export market. However, exports of European wheat have not be fairing badly. From the start of July 2022 to 5 February 2023, the EU exported just over 19Mt of soft wheat, 7% higher than the same period in 2021/22 and 17% up on 2020/21 levels, according to latest data from the EU commission released yesterday.

EU origin wheat looks to remain competitive too, with reports that some EU origin wheat was bought by Algeria in its latest tender which closed yesterday (Refinitiv). 

Escalations to the war in Ukraine

In recent weeks, we have seen the war in Ukraine come back to the for front of market fundamentals, with recent escalations in war adding some support to wheat markets globally.

We are now 41 days away from the expiry of the already extended Ukraine grain export corridor deal. Today, Russia’s Deputy Foreign Minister has said that the efforts to free up Russian exports under the deal have been ‘unsatisfactory’, with the EU being blamed for not delivering on its side of the deal (Refinitiv).

Leading up to when the export deal was originally expiring in November, more volatility was seen in markets, as they were assessing whether the deal would be extended or not. As we approach the new expiry date, we could see this kind of volatility coming back, as an extension is negotiated.

However, even if the deal is extended again under the same terms, it is unlikely Ukraine will be able to export the volume of grain seen pre-war times. From the start of July 2022 to 6 February 2023, Ukraine had exported 9.9Mt of wheat, down from 17.2Mt, during the same period in 2021/22, according to latest ministry data. The ongoing invasion from Russia has impacted production as well as logistics, which has been limiting export volumes and will likely continue to have an impact on the amount of grain Ukraine can produce and export. The ministry have also citied ‘artificial blocking of the grain corridor by Russian inspectors’ as a reason to why ag commodity exports were subdued in January.  

As has been the case since the war broke out, this will remain a key watchpoint going forward.

Markets aligning ahead of today’s WASDE

At 17:00 GMT today, the USDA are scheduled to release its latest World Agriculture Supply and Demand Estimates. From a grain perspective, one of the main watch points is going to be revisions to South American maize output, following extreme drought in Argentina. The average trade estimate, in a Refinitiv pre-report poll, pegs Argentinian maize output at 48.5Mt for 2022/23, which is 3.5Mt down from January’s USDA estimate.

Its important to note, that while Argentinian maize production may be revised down, Brazil are on track for a record breaking maize crop this season. In January the USDA pegged Brazilian maize output for the season at 125Mt. The average trade estimate for today’s release is coming in slightly higher than that at 125.18Mt. So, while we may see some initial support to grain markets if the USDA cut is Argentinian maize production estimate, gains will likely be limited by Brazil’s bumper output.

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