Following on the surprising and bullish USDA report, the spring weather market has finally started!

09 Apr 2021

With very tight supplies and strong demand, the global oilseed markets are all set to remain buoyant. The soya, palm, oilseed rape S&Ds are easy to read: stocks are low, supplies are not improving, demand is expanding. As such, price and crush margins are going up, driven by very supportive vegetable oil markets.

Grain markets are another story. Current favourable weather conditions and acreage have led analysts to anticipate a record wheat production. IGC, for instance, now sees the world production at 789 Mt in 2021, vs 774 Mt in 2020. A 15 Mt increase and most of this additional supply would be located in our regions (Europe and Black Sea). This is clearly not supportive for our wheat prices, even if there is still a long way to go before harvest!

Yet simultaneously, maize markets have developed a much tighter situation during the past 6 months. With dropping supplies in China, the US, Black Sea and potentially South America along with very dynamic international demand, particularly from China, maize stocks are very low (11% stock to use ratio). The recent USDA report did not give much hope for US maize supplies to massively increase in 2021, contradicting market expectations. Furthermore, Chinese demand should continue to grow, despite increasing ASF risks. Consequently, we foresee the maize world stock to use ratio to remain low in 2021 too.

This conflicting situation between wheat and maize will be one of the major triggers for EU and UK prices in 2021. So far, the market has done its job as maize is now trading close to parity with wheat in most markets. This leaves little space for wheat prices to move lower. It is, therefore, the maize market that will drive the grain market trends in the coming months. As such, all eyes will be staring at the US drilling conditions in April and the Brazilian rains in May/June. Western Europe is also starting to worry with a dry and cold spring so far. Any further risks will be strongly priced!

Sébastien Mallet