Farming News - ADM Wheat & Oilseed Rape Market Report - UK wheat prospects rebound

ADM Wheat & Oilseed Rape Market Report - UK wheat prospects rebound

28 May 2021
Frontdesk / Arable / Finance

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

The old adage that rain makes grain is carrying some weight in the current market. Recent precipitation across much of the northern hemisphere has resulted in a greatly improved crop outlook that continues to weigh on global prices.

US markets remain on the defensive, with Chicago wheat trading down a further $11/t on the week. The Dec 21 position has now fallen $43/t from the market high on 7 May.

EU and UK prices have continued to follow the weaker global trade, with new crop Paris and London prices down €5.75/t and £5.50/t respectively over the week.

The rapid pace of spring sowings by US farmers is also adding to price pressure, as it is alleviating some supply fears. USDA’s National Agricultural Statistics Service reports corn and spring wheat sowings are 90% and 94% complete respectively, with talk that the strong pace of sowing could push final corn planting 5mln acres above USDA’s current projection.

That said, the latest US wheat crop ratings are mixed. NASS reported that despite the arrival of much-needed rainfall across the US southern and northern plains, winter wheat crop ratings slipped a further 1% to 47% good/excellent, compared with 54% this time last year.

NASS also said that its initial rating for US spring wheat came in at a disappointing 45% good/excellent, compared with 80% a year ago.

However, the US’s Wheat Quality Council’s tour of Kansas continues to report winter wheat yield potential as well above last year, although higher output could result in lower protein content.

EU prospects have greatly improved over the past week, with crop monitoring unit MARS raising its projection of average soft wheat yields to 5.91t/ha, up 3.5% on the year and almost 4% above the five-year average.

UK prospects have also rebounded over the past few weeks, with estimates for the 2021 wheat crop back up to around 15mln t, a figure that would sharply reduce the level of imports required to balance the books for 2021/22.

Elsewhere, Australian farmers are poised for a second consecutive bumper wheat harvest as they plant grain into near-perfect conditions, while Argentina’s farmers are also getting their wheat crops of to a very favourable start

Whilst market sentiment has changed on the generally improved outlook, concern over fundamentals including the Brazilian corn crop, US winter wheat crop ratings and global stocks of all major commodities at historically low levels may yet be supportive, especially if Chinese demand turns out as expected.

The 2021 harvest must deliver, and we remain just one major crop failure away from another march higher in prices.

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

CBOT soybeans traded sharply lower on the week, followed by soymeal. Soy oil bucked the trend, supported by higher US demand.

Prices continue to be pressured by perfect growing conditions in the US, at least for now. The nearby forecast still calls for widespread rain across the Central and Southern Plains and the Midwest, with temperatures below normal.

US planting progress came out at 75% complete, down five points on trade expectations. The total area is still estimated at 87mln acres by USDA, whilst Informa and some private estimates are at 88mln acres. The National Oilseed Processors Association’s crush figures were reported at 160mln bushels, 9mln below expectations.

Funds were reported to have cashed out some of their length by selling 10,000 contracts of meal and soybeans, but bought 7,000 contracts of soy-oil.

Chinese crush margins are still negative. It was reported that the country purchased seven to 10 Brazilian soybean cargos last week, but this is far behind the volume needed to keep in line with estimates. Soymeal fell sharply on rumours that China will reduce the amount in its feed rations. Widespread rain across central and southern parts of China are now causing localised flooding and very high river levels, which may cause some damage to crops.

Buenos Aires Grain Exchange estimates the Argentina soybean harvest at 85% complete, with crop expectations still at 43mln t.

Canadian canola plantings are progressing quickly and the recent rain across the north eastern parts of Alberta and northern Saskatchewan will be very beneficial to crop establishment.

Australian canola plantings are progressing well. The total area is set to exceed initial planting intentions, which may see output increase by a further 1mln t.

Matif traded lower on the week, pressured by weaker US and oil markets and reaction to the potential increase in the Australian crop.

Sterling has lost some if its gains against the euro as the month end approaches. Most of the recent good economic and vaccine news has been factored in, although a degree of political turmoil following the recent testimony by Dominic Cummings, ex chief adviser to the Prime Minister, to a Commons enquiry on Covid may weigh on sterling.