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

UK new crop futures have slipped £11/t over the week, reflecting the negative sentiment that has affected global new crop markets over the past few days and the influence of a stronger pound.

US markets have continued their downward trend as wetter conditions across much of the country’s main wheat-growing areas improve crop prospects. EU values followed, down €14.

This sell-off could continue in the short term as weather turns more favourable. However, with global stocks set to remain tight throughout 2020/21 and well into 2021/22, crops in the ground will need to deliver, so the longer-term fundamental outlook remains supportive.

There is still a lot of weather to get through, especially given that more recent historical crop losses have been caused by adverse weather during June and July.

USDA’s National Agricultural Statistics Service (NASS) has rated the country’s winter wheat crop at 48% good/excellent, down one point on the week and four points below this time last year.

However, winter wheat in Kansas, which grows more of the crop than any other state, is showing resilience to recent lower temperatures and drought. A recent Wheat Quality Council tour reported potential yields at a 20-year high.

Meanwhile, NASS reported US corn and spring wheat sowings at 80% and 85% complete respectively.

European trade association Coceral boosted its outlook for this year’s EU and UK wheat harvest to 145.8mln t from 141.5mln t previously, citing excellent yield prospects in the Balkan countries and Spain.

UK new crop prospects will have benefitted from the recent rain, with crops generally showing a marked improvement. ADM Agriculture’s projection for the 2021 wheat crop is now circa 14.6-14.8mln t, compared with 14.2-14.4mln t a few weeks ago.

However, the UK won’t be chasing export business next season, particularly given the forecast of sharply higher domestic usage, which should be supportive to the market.

The UK is also looking at a tight scenario at the end of this current season, supporting nearby values. Wheat imports totalled 1.86mln t to the end of March, but most trade participants are working on a final end-of-season figure of about 2.1mln t, so there is still a way to go.

In addition, with the government’s roadmap out of Covid still on track, we should see a small increase in domestic usage during Q4.

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

What goes up must come down, and after a few weeks of higher prices, markets were subject to a sell off midweek. 

US agricultural markets struggled to find anything new to trade, sparking some aggressive fund selling early in the session, which pushed the market down to levels not seen since the start of May. After some disappointing crush figures at the start of the week, funds are estimated to have sold out of their recent length.

US weather remains favourable, with rain in the forecast until the weekend, before turning warmer in the next few weeks. 

It’s been an interesting week for the oil market. Malaysian palm oil rallied to fresh highs on increased exports for the first half of May, but reversed those gains on Thursday morning on the back of rising Covid-19 cases in China.

Other oil markets also collapsed after weeks at highs. Soy oil peaked at the start of the week before tracking lower, while crude oil traded down due to increased US inventories and weaker stock markets. 

Officials in Argentina have proposed a law to halve the country’s biofuel mandate to 5%. If passed, this would place more soy oil on the market. However the US government is still working on plans to increase veg oil consumption in its energy market. 

Canadian canola plantings are still underway with rain making its way across the major growing regions. Prices on old crop remain just off all-time highs, while new crop futures traded sharply lower, following other agricultural markets.

Matif rapeseed traded back close to highs at the start of the week, but closed €14 down midweek to €528.50 on the August position.

Sterling is rangebound – UK rapeseed prices are lower on the week as a result of the recent sell-off.