WHILST THE CORN MARKETS REMAIN WELL SUPPORTED, THEY HAVE SUBSIDED FROM THE HIGHS AND WHEAT IS NOW DRIVING ITS OWN PRICE DIRECTION.


Closer to home, looking at EU exports and they have been hard to decipher, with a ‘technical’ problem excluding the French data, but if the French port data is included (3.4MMT at the time of writing) we see EU exports running 30% ahead of last year. A pace that can’t continue, and the EU will need to price itself out of an incremental demand.


One area of optimism is the wheat demand for animal feed rations. Corn is currently more competitively priced than wheat, and in Strategie Grain’s November update they expect corn to attract 1.5MMT more animal feed demand in the EU (than their October forecast), and this will be at the detriment to wheat.


Another consideration is wheat quality, while the USDA looks at all wheat supplies, they do not consider what % of that is milling wheat. Whist the European wheat crop increased substantially from last year, the % of that which made milling wheat specification dropped considerably. Strategie Grains estimate that the % milling wheat within soft wheat production in the EU27 + UK has decreased from 69% in the 2020/21 marketing year to 59% in 2021/22. Milling wheat production has dropped from 88.8MMT in 2020/21 to 85.5MMT in 2021/22. It is milling wheat that is used in the production of food goods for human consumption, and supply has clearly tightened. Whilst milling wheat specifications can be relaxed to accommodate, and we have seen a number of the major importers doing so, there are implications and these will inevitably result in higher costs.


Amongst rising energy and labour costs, freight and haulage costs/delays, this spike in the cost of wheat will undoubtedly compound the problem, and lead to us paying more for some of our daily consumables. Wheat might not be driving inflation, but it certainly is contributing to it.


Can these levels be sustained, and will the markets push much higher? Who knows, but there certainly is a fundamental story driving it.


Ryan Easterbrook E: ryan.easterbrook@admisi.com T: +44(0) 20 7716 8054


11 | ADMISI - The Ghost In The Machine | Q4 Edition 2021


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