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

Markets began the week firmly higher on news that Russia is expected to increase its wheat export tax that is due to commence on 15 February.

Additional market support came from USDA’s bullish global outlook in its January report. Wheat showed little change, with most of the 3mln t fall in global stocks seen in China, but reductions in US corn yield and production took centre stage.

The aim of Russia’s planned tax is to stabilise domestic prices. However, it has resulted in global values firming higher than the original €25/t tax proposal and provides no incentive for Russian farmers to sell.

This means Russian export prices are virtually impossible to fathom and leaves the potential of export trade switching back into Europe, which the balance sheet can ill afford, or into the US.

In addition, Ukrainian livestock and poultry producers have asked their government to limit maize exports in the 2020/21 season to 22mln t to avoid a domestic shortage. So far exports have reached 9.7mln t.

European prices rose to an eight-year high (front month) on Russia’s news. The market has since retreated from the multi-year highs, but UK prices remain £3-4/t higher on the week.

UK prices are still not high enough to achieve the level of imports required to balance the books. We can expect some profit-taking to occur, which may deter from the recent highs.

However, EU and UK prices should overall remain underpinned, driven by the tight domestic balance sheet and limited export availability as food security becomes a greater factor in many key export regions.

In other news, Brazil’s government agency CONAB reduced its estimates for the country’s current corn crop to 102.3mln t, although that is still well below the revised USDA projection of 109mln t.

Argentina has lifted a suspension on corn exports announced in December, opting instead for a temporary 30,000t daily cap on export sales.

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

US soybeans saw big gains again this week on the back of Tuesday’s USDA report, trading above $14/bushel.

The soy report itself wasn’t as bullish as some expected , but was enough to push the market to new highs. USDA kept Chinese imports at 100mln t (+ 1.5% on last year), but some feel it could be more. US production fell to 112.5mln t (113mln t previously).

Ending stocks fell to 3.7mln t, which leaves the stocks-to-use ratio at 3%, the lowest ever reported in January. Some feel that it could even be less as time goes on. World ending stocks were lower, but above trade expectations, at 84.31mln t.

In South America, central parts of Brazil should see showers over the next few days, but the south and all of Argentina remain dry for the rest of January. Interestingly, USDA kept soybean production in Brazil unchanged at 133mln t, but it did reduce the crop in Argentina from 50mln t to 48mln t.

China imported 7.52mln t of soybeans in December, taking the total to 100.3mln t for the year. USDA announced more sales of US soybeans this week, with a further 464,000t booked on Wednesday.

The balance sheet is extremely tight. Demand has to be rationed somehow, and that would usually be through price, but if sales continue then it shows current values are not doing the job. Any further cuts to South American production would cause concerns and, as USDA figures are higher than trade estimates, it could happen.

Matif rapeseed made new highs in the session before dropping back slightly before the close. May closed higher on Wednesday night, but will be reactive to oil and soy market direction from here. Markets were overbought, so there is some room for a correction.

Sterling closed above 1.12 against the euro, which is up on the week. That pressured UK rapeseed prices slightly, but prices are still trading close to season highs.