Jonathan Lane, ADM Agriculture’s head of grain trading, comments on the wheat market

US prices are trading up about $2-3/t on the week after earlier weakness had been negated by position- taking before and after the release of the USDA monthly report.

There were no real fireworks in that update. USDA slightly lowered US wheat stock but kept corn stocks unchanged.

Global wheat stocks were reduced by 4mln t on the month as higher usage offset a rise in production, whilst corn stocks were lowered by 2.5mln t.

Stats Canada has raised its all-wheat crop estimate for 2020/21 to 35.2mln t, up from 34.1mln t previously and 32.6mln t last year.

Buenos Aires Grain Exchange reported that Argentina’s wheat harvest was 40% complete, compared with 46% a year ago. Soybean and corn planting progress was put at 48% and 35% respectively.

China’s National Bureau of Statistics sees 2020 corn output barely changed year on year at 260.7mln t, although many question the data.

Russian wheat exports remained strong in November, estimated at 4.2mln t, bringing the cumulative seasonal total to 21.1mln t, 15% above last season’s pace. Rumours of an export tax on Russian wheat to control domestic prices have been heard this week.

Ukraine has exported 22.1mln t of grain so far this marketing season, down 13.5% on the year, mainly due to lower maize (6.03mln t) and wheat (12.02mln t) sales.

Ukraine’s agriculture ministry reported farmers had sown 8.06mln ha of winter grain for the 2021 harvest, equating to 98% of the expected area, including 6.1mln ha of wheat.

Official French estimates put the country’s soft wheat area for the 2021 harvest at 4.73mln ha, up 12.4% on last season’s final area, but down 5% from 2019.

The same source has increased the forecast of French non-EU soft wheat exports during the 2020/21 season to 6.95mln t, although end-season stocks were left unchanged at 2.5mln t.

Grain trade association Coceral forecasts a rise in soft wheat production in the EU (including the UK) next year to 143mln t, up from a revised figure of 127.9mln t in 2020.

UK prices have remained steady during the past week, although sterling has weakened as the likelihood of a Brexit UK/EU trade deal seems to be receding.

What would a no-deal Brexit mean for UK grain values?

If efforts to negotiate a trade deal with the EU come to nought, the UK will move to WTO terms and conditions regarding trade, with both cereal imports and exports subject to tariffs after 1 January  2021.

For UK farmers, this should continue to support farm gate prices in the current marketing year, as we need to import. The cost of importing grain into the UK, both from the EU and potentially Third countries depending on the quality of the wheat, will increase from 1 January 2021.

It remains unclear whether the UK will be given its share of the EU tariff rate quota (2.4mln t annually at €12/t) for the current season; the non-EU TRQ import tariff is set at €95/t.

After 2020’s poor harvest, the UK’s dependency on imports for the 2020/21 marketing season has dramatically increased. This means that prices must get to, and stay at, import parity to allow the necessary levels of imports to balance supply and demand, unless non-traditional grains (sorghum/tapioca etc) somehow replace the need for wheat.

However, for 2021/22, a different scenario is looming. The expected rebound in the UK winter wheat area should ensure production returning to a more normal level, weather permitting. This places the UK back into a surplus position and the need to export.

As tariffs for exporting to the EU will also be adopted, UK prices will need to price these tariffs into export quotations, meaning potentially lower farm prices than we would have seen in a zero-tariff situation.

Will Ringrose, ADM Agriculture’s head of oilseeds, comments on the OSR market

CBOT soybeans have been in liquidation mode for most of this week, which saw prices touching three-week lows.

China remains out of the market for US soybeans, and it looks like demand is running out of steam for now. Crush margins have dropped back from highs. Meal stocks are decent, but meat demand is falling back from its recent peak. However, it is rumoured that China has been in the market to buy Brazilian soybeans for March-April.

Soybean planting continues in South America but the weather is starting to look dry as we head into the weekend. Some light showers forecast next week but Argentina remains dry, with La Nina still forecast well into January.

Sowing in Brazil is 90% complete, although some of that area will need re-drilling. Farmer selling is non-existent.

Informa updated its crop estimates last week, estimating world soybean output at 362mln t compared with 337mln t last year (Brazil 132mln t vs 128mln t last year, Argentina 51.5mln t vs 49.7mln t last year).

Veg oils weakened across the board. It was mentioned that China are washing out some palm oil contracts this week, with rumours of soy oil sales from their reserves.  

Australia’s rapeseed harvest is nearing completion. There is some rain in the forecast, which may cause a few delays, but nothing to be concerned about. Crop estimates are being increased closer to 4mln t.

Matif rapeseed closed lower on the back of weaker US and veg oil markets. February futures are currently trading within a €10 range.

Sterling remains volatile amid the uncertainty as to whether or not the UK will have a free trade deal after 1 January 2021.