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

The fallout from the global spread of coronavirus continues to affect all markets. Risk appetite has disappeared as governments take dramatic action to combat the epidemic, and the eventual impact upon financial markets and world economies remains unknown.

However, grains will need to move and to be sold. Animals need to be fed and crops will get planted. Food will be produced, and consumers will continue to buy. Stability will eventually return to all markets.

In the meantime, the recent 10% decline in the pound, which has fallen to its lowest level against the US dollar since 1985, saw London futures rise about £10/t on the week, supporting UK farm-gate prices in the short term at least.

Sterling’s weakness was partly due to the government’s proposed £350bln stimulus package to support business during the coronavirus epidemic.

EU (Paris) futures were also up,  by €7/t on the week, although a sharp decline in the euro rate meant prices eased about $1 in dollar terms.

EU soft wheat exports as of 15 March reached 22.2mln t, up 72% on the year.

US markets have recovered previous losses as demand for a safe haven of dollar-priced commodities appeared.

Further positive news came in the shape of the US government’s proposed $1trn stimulus package to try to support the world’s largest economy.

In addition, US prices bounced off recent lows yesterday on rumours that China may be in the markets for several cargoes of US hard red winter wheat.

However, Market researcher SovEcon raised its estimate for Russia’s March grain exports to 3.4mln t, up from 2.1mln t previously. This followed a sharp decline in the value of the rouble, which saw shipments rise 30% on the week.

Ukraine is not planning to ban grain exports, despite an earlier call from the president for restrictions on food exports.

Further ahead, market specialist IKON Commodities forecast Australian 2020/21 wheat production at 27.9mln t, well above the current 21.4mln t estimate from state research organisation ABARES.

By contrast, Ukraine’s Institute of Agrarian Economics reported that the country’s 2020 winter wheat output may fall 12.5% to 24.2mln t, due to low soil moisture as a result of little to no snow coverage.

Coceral lowered its estimate of the EU and UK’s 2020 soft wheat crop to 136.5mln t, down from its initial prediction of 137.9mln t, and sharply lower than the 145.7mln t harvested in 2019.

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

It has been another week in which macroeconomic markets have, unsurprisingly, led the oilseed complex.

Extended global measures to contain coronavirus have led to panic in world markets and oilseeds were one of the many casualties.

The Dow Jones has now given back all gains since Trump took his presidency in early 2017, losing 13% last Monday alone, the largest fall since 1987’s ‘Black Monday’.

China has released economic output figures for the first two months of 2020. These show output down 13.5%, retail sales down 20.5%, real estate construction down 44.9% and house sales down 34.7%. Some economists are taking this as a blueprint for what is to come in the western hemisphere over the next two months.

China has had its first day since the outbreak began where it has reported no new domestic cases. With treatment centres in the nation reportedly closing down due to lack of patients, it is a hopeful sign of the short-term nature of this virus.

In the US, soybean values fell week on week, losing $0.23 cents per bushel on Monday alone, as part of the spill-over from the stock market sell-off. However, there are signs that the market is beginning to follow fundamental influences again.

Logistical issues in Brazil could leave the door open to more sales of soybeans out of the US to China in the coming weeks, as well as a lack of farmer selling which is squeezing some US producers in the short term.

In South America, aside from the logistical issues at Brazilian ports, the dry weather has persisted a few days too many. Agrosoja has now reduced the Brazilian crop estimates to 120.6mln t, against USDA ‘s estimate of 126mln t, with others putting the Argentinian crop around 52mln t compared with USDA estimate of 54mln t.

Since last Thursday, May Matif rapeseed futures have fallen €12 to close Wednesday evening at €344.25. On Monday the market traded at values as low as €330.75 before recovering slightly over the last couple of days.

This decline is a largely a result of the outside macroeconomic influences, as well as cheap crude oil, which is now trading well below $30 per barrel. This has had a severe knock on effect on biofuel demand which accounts for a large percentage of EU rapeseed demand.

The UK market has been led by sterling , which has fallen below €1.07 for the first time since 2009. While Matif futures have fallen €12 since last week, the decline in currency has actually seen a small gain in prices at the farm gate.

However,  the picture remains volatile and is likely to stay that way for the foreseeable future while coronavirus continues to grab the world’s attention.