David Sheppard, ADM Agriculture joint managing director, comments on the wheat market

The US market is marginally higher on the week. Weakness emanating from last week’s stock report has been countered by short covering amidst weather concerns.

The slow export pace does increase the likelihood of the USDA raising US ending-stocks in next week’s report, but declining US soft red winter crop ratings and continued concerns over weather/spring sowing delays have encouraged funds to trim their current exposure.

However, reports from Canada suggest more spring wheat could be sown due to the ongoing dispute with China over canola shipments, providing some resistance to further market gains.

European prices have been mixed over the past week, with old crop higher and new crop lower.

Firmer cash premiums, driven mainly by logistical issues, and a further heavy shipping line-up in France, have supported old crop.

The prospect of a rebound in 2019 EU soft wheat production, together with a rise in the euro to a four-week high against the US dollar, contributed to weaker new crop markets.

UK prices have shown little change on the week, with both old and new crop values virtually unchanged.

Market dynamics remain lacklustre as the whole trade seems to be waiting for a conclusion to Brexit. The ongoing debate triggered a small weekly gain in sterling as currency markets seemingly liked the prospects of an extension or a deal as the next move for the UK government.

In summary, global markets have edged higher, although the US/China trade talks still remain the major unknown. The weather has, and will increasingly have, a major say in the short-term price direction. On the flip-side, demand and exports continuing to drag and the prospect for a rebound in global wheat production in 2019 remains.

ADM Agriculture’s Jonathan Lane comments on the OSR market

CBOT Soybeans found support earlier this week on continued optimism that a US/China trade agreement may soon be finalised. However, the trade has since avoided further speculation and awaits an official/definitive announcement.

China continued to purchase US-origin soybeans, 828,000t this week, despite Brazilian being the cheaper supplier. Exports to China remain approximately 12 mln t down year on the year.

Favourable weather across South America has enabled harvest to advance. Crop estimates for Argentina are likely to increase when more yield information is available. Harvest in Brazil is approximately 75% complete. Trend yields are predicted to be higher than expected, ranging between 115-118 mln t (compared with 116.5 mln t last year).

US weather remains a concern. Localised flooding continues with rain spreading across the eastern part of the country. Farmers are likely to switch from planting corn to soybeans. 

Elsewhere, quality/political issues between Canada and China remain unresolved. This is now having a knock-on effect for next season, with some Canadian traders estimating a 10% fall in canola plantings.

Closer to home, European rapeseed prices broke through the nearby €360 resistance level earlier in the week. Vegetable oil prices were higher on the week, with Malaysian palm oil firming 4% as a result of increased export demand.

Farmer selling is slow. Crush margins remain unchanged and new oil business is hard to place. Increased imports and continued downtime at one European crush due to salmonella cleaning is increasing the EU carryout.

However, new crop supplies remain tight. Strategie Grains reduced its estimate of EU plantings by 90,000 ha to 5.84 mln ha, the lowest level since 2011.

In the UK, rapeseed prices continue to trade within a narrow range, with any increases in European prices being negated by firmer sterling.

Larger EU and UK ending stocks are likely to weigh on the market at some point. However, with Brexit still unresolved, sterling is likely to remain volatile for the foreseeable future. This will be the main catalyst for price direction.