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

Hemswell, Lincolnshire, 6 December 2019

UK (London) futures are down £1.25/t on the week, pressured by a surging UK pound, although seasonal logistics continue to underpin spot cash premiums.

Opinion polls suggesting a favourable outcome for the government in the forthcoming general election has seen sterling surge higher over the past couple of days. This undermines the UK’s export competitiveness and has made imports look more attractive.

Conversely, EU (Paris) futures are up €3.25/t on the week, following the trend in the global market, despite the US dollar falling to a four-week low. Talk that Argentina had secured a sizable share of the upcoming Algerian tender did reduce prices on Wednesday.

US prices rose $3/t as the market continued to find solid export trade amid confirmation of declining southern hemisphere crop prospects.

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) cut its estimate for the country’s wheat output to 15.85mln t, down 8% on the year. Crops were adversely affected by unseasonal conditions in the early spring.

Russian wheat prices recorded a third consecutive weekly rise last week, as higher demand from exporters and domestic processors offset a rise in ex-farm sales. 

Egypt’s state buyer GASC purchased 295,000t of Russian wheat for 21-31 January shipment, with the average price $3.50/t higher than paid in their previous tender two weeks ago.

Looking at new crop fundamentals, some progress has been made on drilling in the UK, but actual progress has depended on soil type and previous rainfall amounts. 

The condition of the French wheat crop deteriorated again last week, while farmers made limited progress with sowing. 

75% of the crop now rated as in good/excellent condition, compared with 78% last week, with a fifth of the intended area still to sow.