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

Weather concerns across many major wheat-producing regions prompted increased buying activity in the markets this week.

US wheat prices rallied just over $11/t as unease increased over the effect of dry conditions on new crop prospects in the US Southern Plains and Russia, as well as the upcoming harvest in Argentina.

That said, increased ending stocks for the current marketing season expected in Friday’s (8 October) USDA report, particularly due to increased supplies in Russia and perhaps Australia and Canada, are likely to offset any Argentinian shortfall.

However, the market is more focused on the US maize balance sheet and is waiting to see how USDA manages the numbers for last season and whether it increases exports for the current season, particularly to China.

Looking at Russia’s prospects in more detail, Russian agro-consultant IKAR has raised its forecast for Russia’s 2020/21 wheat crop to 83mln t, up slightly on its previous forecast of 82.8mln t.

SovEcon forecasts the country will export 38.9mln t of that total. The market researcher also raised total grain exports to 49.1mln t, up 2.5mln t on its previous forecast.

However, Russia’s agriculture ministry is expected to provide details later this month on a possible grain export quota for the first half of 2021.

This season’s forecasted output of 82-83mln t would suggest scope for a very loose quota. However, with record domestic prices and a concerns over 2021 crop prospects, the ministry may decide otherwise. The debate will be closely watched.

Recent rain across much of Ukraine has improved conditions for winter grain sowing, reducing some concerns about the 2021 harvest after a severe drought.

Bullish news came from Morocco, where wheat imports are estimated to hit at 6.2mln t, 35% higher on the year due to lower domestic production and the suspension of wheat import duties.

This comes as French wheat shipments in September fell to their lowest level in over a decade to 166,000t as activity continues to ease after a poor harvest.

However, Algeria’s government recently reported an upper limit of 4mln t on bread wheat imports this season. Usually the country buys in 6mln t.

In the UK, DEFRA’s first estimate of 2020 wheat output is 10.13mln t, down more than 37% on last year.

Domestic prices have followed the international trend, trading back up to contract highs. Whilst the demand side of the equation remains clouded, especially with further Covid-19 restrictions likely to be adopted next week, the supply side remains difficult, with farmers seemingly keener on conditioning harvest crops or preparing fieldwork for sowing, rather than marketing.

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

US weather is forecast to remain largely dry for the next 6-10 days in the Midwest. Harvest continues at a fast pace and at the start of the week was reported to be at 38% complete compared with 20% last week . Crop conditions remain unchanged at 64% good/excellent.

The next USDA report will be released on Friday 8 October. It will be interesting to see if any changes are made as a result of last week’s surprisingly bullish report.

Managed funds continue to increase their long position, yesterday buying a further 8,000 contracts to bring the total close to 284,000 contracts. Soybean open interest has hit a record 1 million contracts.

Brazil remains dry, but rain is forecast from 10 October. Delayed plantings have already put the availability of South American beans back to late February, so the market will be closely watching weather developments. Brazil's AgRural estimates soybean plantings at 1.6% versus the five-year average of 4.5%.

Despite China being on holiday until Thursday, the country still came into the market to buy US beans along with further sales to unknown destinations.

In Canada, harvest conditions have been ideal, but rain and colder temperatures will hit several areas today and over the weekend. Harvest is estimated to be 72% complete.

In Australia, harvest has just started but few loads have been received so far. Weather looks favourable across Western Australia, which should allow decent progress.

Matif rapeseed is firmer on the week, getting back close to season highs. Oil markets also firmed, which helped support prices along with ongoing planting and crop concerns in the Ukraine.

UK prices remain largely stable following EU levels higher. Sterling remains rangebound, but is still one to watch as we get closer to knowing whether or not we have a deal with the EU.