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

Reports of favourable rains sweeping across South America, increased availability of exports from Russia and the confirmation of a massive Australian wheat crop were enough to produce long liquidation in the Chicago grains and oilseed complex, pushing prices lower.

However, the reduction in prices and the continued decline of the US dollar has made US products more competitively priced, and rumours of further Chinese buying enabled prices to bounce from the recent lows.

While the EU and UK markets followed the US lower to a degree, the steady decoupling away from the global market continues, as both regions focus on their own historically tight balance sheet.

UK ex-farm prices continue to be supported, as the UK needs to get to, and remain, at import parity to attract larger volume of wheat imports during the second half of the season. However, with a few more questions being raised about the ongoing UK/EU trade talks, the apparent close-to-a-deal scenario seems a little bit less certain, with talks apparently going down to the wire.

Overall, US wheat prices were down around $4/t on the week.

Buenos Aires Grain Exchange placed the Argentine wheat harvest at 31% complete, with 39% and 32% of the respective soy and corn acreage sown. However, the weather remains uncertain and crops remain vulnerable to any excess dryness.

Russia’s agriculture ministry reported that the country may increase the size of its grain export quota planned for Feb 15-Jun 30 to 17.5mln t, up from the current 15mln t figure.

Research organisation ABARES revised its forecast for this season’s Australian wheat crop upwards by almost 10% from its September estimate to 31.2mln t.

Analyst IKAR sees Russia’s 2021 grain crop at 125mln t, down from 130.5mln t this season, including a 6mln t decline in wheat production to 78mln t.

Reports from within Russia suggest that 22% of winter wheat sown is in poor condition, which is the highest percentage since 2013.

Ukraine has exported 21.1mln t of grain so far this season, down 11% year on year. Corn exports are put at 11.8mln t (13.2mln t last year) with wheat at 5.2mln t (6.5mln t last year).

The Chinese buying spree continues to pressure EU grain supply, pushing cereal prices to a two-year high, as the country continues to scoop up the reduced French wheat and barley surplus.

Egypt’s state buyer (GASC) has purchased 345,000t of wheat over the past week (285,000t Russian/60,000t Ukrainian), swelling strategic reserves to at least five months.

International Grains Council cut its forecast for 2020/21 global corn production to 1,146mln t, citing reductions in the US, Romania and Ukraine.

IGC raised its forecast for 2020/21 global wheat production to 765mln t, while increasing its projection of Chinese imports to 7.8mln t.

EU soft wheat exports were reported to have reached 9.3mln t as of 29 November, down 24% year on year, as the line-up of vessels suggested that the pace of exports was starting to slow.

UK futures prices are down £2/t on the week (May 21), although physical prices remain underpinned by the tightness of the UK balance sheet and a drop in the UK pound due to ‘negative comments’ over the potential EU trade deal.

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

Agricultural commodity markets struggled to find support this week and entered a spate of liquidation.

CBOT soybeans struggled to break $12 again, quickly falling to $11.50 in only a few sessions, levels not seen since mid-November.

Talks of rain in South America pressured the market, although the La Nina weather event is expected to continue well into the new year. That said, in the short term rains will be helpful, although the big question will be if crops are able to catch up.

Private analysts continue to lower new crop expectations. One group reduced its crop estimates by 2mln t to 130mln t, highlighting 40%-50% of the crop under stress. It also lowered the Argentinian crop from 51mln t to 49mln t. Argentinian soybean planting was estimated at 43% complete compared with 32% last week, in line with the five-year average.

China has been absent from the US soybean market since 6 November, undermining trade confidence of a pick-up in demand, especially when Chinese crush margins have fallen from the highs. That said, there is a rumour that China bought January soybeans from the US yesterday, but nothing is confirmed.

Funds continued their selloff this week on a lack of bullish news, taking their overall long close to 204,000 contracts.

Veg oils started the week firmer, but weakened, hitting a three-week low.

Australia’s oilseed rape harvest is estimated at about 70% complete, and farmer selling at about 50%.

Matif rapeseed fell to levels not seen since early November, trading €17 down to touch €400.50 on the February position. The complex struggled to find additional support with weaker US markets.

UK rapeseed prices have been helped by weaker sterling in recent days. A lack of Brexit progress saw levels fall below 1.10500 yesterday, not seen since October.