13 Aug 2021

Historically, USDA officials have always been slow to adapt their figures to changing conditions. Yesterday’s report was the exact opposite and surprised the market. One can only expect that the report objective was to strongly alert the market on potential grain deficits to support prices and incite farmers, all around the world to massively invest in next season’s drillings.

Ongoing weather issues have indeed taken world stocks to very dangerous levels. Historically, it is well known that higher food prices can only lead to chaos in the poorer countries. We had a corn deficit. We are now about to face a massive milling wheat deficit that will directly impact human consumption markets. No doubt that politics will soon start to investigate the situation, similarly to 2008.

Simultaneous wheat production issues are occurring around the globe. All major milling wheat producers are facing quality and yield concerns. US, Canadian, French, German, Russian and possibly soon Argentinian wheats have significantly suffered from this season very hectic weather conditions. Supplies are suddenly tightening, and it should take another month before we really start having a precise idea of the situation.  Prices are responding accordingly as traders are struggling to cover their needs, especially for the exportable milling qualities.

Specific weights and Hagberg are the main issue and buyers are spending most of their time sampling, testing, and blending.

Should farmers consider current historical high levels as a selling opportunity? The answer is clearly yes. Very soon we will act on both old and new crops. But volumes and qualities need to be secured first. And milling qualities should be well segregated as they will most probably be very well priced.

Sebastien Mallet – ODA UK