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

Hemswell, Lincolnshire, 17 December 2020

News that an export tax will run alongside Russia’s export quota from mid February to the end of June has dominated this week’s market news.

The tax, set at €25/t, is aimed at reducing record high domestic prices, although Russian farmers seem less than interested in selling at the moment, given concerns over new crop prospects.

Exporters still have to cover existing sales up to the start of the quota. With seasonal logistics also starting to bite, prices may remain underpinned by export demand into the middle of January.

US prices are up about $3/t on the week in response to the news. 

Egypt’s state buyer GASC has purchased 120,000t of Romanian and 115,000t of Ukrainian wheat for February 1-15 shipment. Russian prices were uncompetitive due to sellers adopting export tax price protection.

In its monthly update, Strategie Grains lowered the projection for the 2020/21 EU soft wheat crop by 300,000t to 129.6mln t, whilst citing a heavier outlook for 2021/22.

Non-EU soft wheat exports in the 2020/21 marketing season had reached 11.6mln t as of 13 December, down 17% from the volume cleared last year.

Brazil expects to harvest a record grain crop of 266mln t in the 2020/21 harvesting season, mainly due to an expansion of its soybean crop.

Buenos Aires Grain Exchange sees Argentina wheat harvest as 53.5% complete compared with 61% this time last year. 

Egypt aims to produce more than 10mln t of wheat this year, as the world’s largest importer tries to lower its dependency on imports.

UK prices are trading up about £1/t on the week, despite a firmer pound that reflected renewed hopes that an agreement on a Brexit trade deal agreement might be closer.

Over the next few weeks, cash markets will become ill-defined as seasonal logistics reduce availability. Cash premiums should remain well supported into the new year, when hopefully we all should know where the UK stands trade-wise.