Markets are moving in opposite directions

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The average weighted price fell 8.8% at last week’s Global Dairy Trade (GDT) auction, ending its run of six consecutive increases. The price fall suggests the rise in demand seen in February may have tailed off.

Buyers’ concerns about product availability over the next few months have reportedly eased. This could be partly related to Fonterra raising the amount of product forecast to be sold at this auction, as well as over the next twelve months.

The approaching spring flush in the EU, combined with the removal of quotas, may also be easing concern over future supplies. Production levels are hard to predict because low farmgate prices are expected to continue to squeeze margins and potentially hamper growth.

As a result, the market seems unsettled and it appears buyers are waiting for a clearer indication on price direction before committing to longer term deals.

Meanwhile, UK feed wheat has had a bullish few days with futures prices bouncing back above the £120/t mark last week.

May-15 contracts broke through the £120/t barrier. In contrast, Chicago maize May-15 contracts fell sharply, closing at $146.06/t last Tuesday, down $6.70/t week on week. This fall follows news that China, the world’s second largest maize consumer, has purchased over 600kt of maize from Ukraine over the US.

Closer to home, June-15 Paris maize futures prices have been on the up at €164.75/t on Tuesday lst, a gain of €2.75/t over the week. French maize prices remain higher even when converted to dollars which could provide support for EU and UK wheat which has had increased competition from maize in feed demand recently.

“Unusually dry and warm weather”, as described by the IKAR agriculture consultancy, has raised concerns over Russia’s 2015 grain crop as an early spring lowers moisture levels and potentially hampers winter wheat and future spring crops.

Russia has a large domestic demand and state stocks are in need of replenishment following the fall of the rouble.