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

Firmer prices this week have been driven mainly by talk of tightening supplies and increasing global demand.

The expected global easing from Covid-19 restrictions is supportive, which was reflected in the USDA Outlook Forum projections for 2021/22.

Even with increases in corn and soybean sowings, 2021-22 US ending stocks are seen as little changed, while wheat carry-out stocks are forecast to decline by 16% to 698mln bushels. The forum pegged US all-wheat acreage at 45mln acres, up from last year’s 44.3mln acres and forecast a 1mln-bushel increase in production.

This means US wheat will need a ‘perfect’ growing season. With spring planting soon to commence, weather will become increasingly important as any signs of disruption affecting the supply side of the equation will prompt strong buying activity.

The market was quick to react, and US wheat prices have traded up $13-14/t on the week.

Russia’s export prices followed the US increase after declining for the past month.

Paris front-month wheat futures have recently traded at a 7.5-year high, as concerns over tightening EU supplies and strong demand continue to squeeze market shorts.

EU soft wheat exports had reached 16.59mln t as of 21 February. Although that is well below the  20.34mln t cleared by the same week last season, there is a much smaller wheat pile to export following the poor harvest.

UK prices have also firmed, with old crop up just under £5/t and new crop up £2.50/t, despite sterling’s continued strengthening.

On Wednesday the AHDB updated its UK wheat supply and demand figures for the UK. The release included a sharp reduction in wheat usage within the animal feed sector, replaced with increases for barley, maize and oats. Imports were projected at 2.1mln t. With 1.4mln t imported as of end-December, that leaves a further 700,000t to be shipped in.

This means UK prices will have to stay at import parity, which explains why the UK market has firmed, despite the weekly gain in sterling.

It has been announced that due to the Government’s mandate to move to E10 (10% ethanol) fuel, Vivergo, the Hull-based ethanol plant, will reopen. Together with Ensus, on Teesside, this means that wheat usage will increase during the 2021/22 marketing season.

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

Outside markets have been mixed over the course of the week with equities bouncing off the lows on Tuesday. Crude oil firmed, with West Texas Intermediate closing above $63/barrel last night, having closed at $59 on Friday. Given the potential easing of various lockdowns, analysts forecast oil could go back towards $100.

CBOT soybeans have also rallied again this week, up 37c/bushel since Monday. The story remains the same – tightening supply for the old crop balance sheet and an equally tight supply for new crop has added to the continuing worry over South American crop conditions.

The weather situation in South America is relatively unchanged. Dryness persists in Argentina – what rain has fallen has quickly evaporated. Brazil continues to be behind on harvest, with latest estimates at 35% complete and yields disappointing.

Veg oil markets remain very firm. Asian markets were all higher across the week, and on Wednesday alone, Chinese soy oil and palm were up over 100 Yuan. Malaysian palm oil reached contract highs, as did CBOT soy oil, which closed above 50 cents/lb.

Canadian canola closed lower on Wednesday, but only after trading higher for most of the week.

To everyone’s surprise, Matif rapeseed has rallied €30/t since Monday to its highest level in eight years (€491/t at time of writing). It has previously been noted that Matif OSR was undervalued compared to global equivalents, although a rally of this nature would suggest it is highly overbought.

This rally, which has transferred into both delivered and ex-farm prices in Britain, is even more remarkable, as sterling rose to above €1.16, a factor that would normally pressure UK prices.