David Sheppard, ADM Agriculture joint managing director, comments on the Wheat Market

Traders were expecting a bearish US report this week and USDA didn’t disappoint.

Forecasted US wheat and corn stocks were raised and export projections for both were trimmed. With no fresh news from the US/China trade talks and lacklustre demand for US wheat, further cuts in future reports cannot be ruled out.

Spring crop sowings in the US have commenced. Poor weather could delay or even stall progress in certain areas, but the forecast did little to dampen the winter wheat market as ratings improved on the week.

European prices remain mixed with old crop little changed on the week and new crop slightly lower.

Firm cash premiums, linked to another decent shipping line-up, continue to underpin the old-crop market.

New crop levels have eased, mainly on the French agriculture ministry’s upward revision of the 2019 soft wheat area. These are forecast at just over 5mln ha, an increase of 2.8% on the year.

UK prices are also little changed. There is little selling off farm and consumer buying has recently slowed.  More competitive maize imports, now seen at 2mln t for the season-to-date, continue to undermine wheat usage.

The Brexit extension will allow both the export and import of grain at zero tariff to continue until at least the new deadline.

Given the reported build-up in global stocks and expected rebound in global 2019 wheat production, plus the £25-30/t spot-to-harvest price discount, current ex-farm prices look attractive.

In summary, the bearish USDA report should slow any substantial rise in prices. However, the predicted 10mln t combined gain in global wheat and corn stocks, while providing extra assurance against new crop weather issues, still shows a fall year on year.

In the case of maize, the global stock-to-use ratio would be at a historically low level, especially after discounting the two-thirds of global supplies held within China. This will keep weather firmly in the spotlight, with US planting delays and dryness concerns in the EU and Black sea worthy of note.

OSR market

USDA’s April report fell broadly in line with trade expectations.

World 2018/19 soybean stocks edged up to a record 107.4 mln t, whilst the US soybean carryout fell slightly but remains a hefty 24.4mln t. 

Despite recent optimism, the US/China trade agreement is still not signed. Even if demand did increase, buyers could favour cheaper Brazilian supplies. 

Cool wet weather preventing field work in the US remains a concern. This could lead to reduced corn plantings and more soybeans for harvest 2020.

Ongoing disputes between Canada and China have reached a stalemate and canola vessels still await approval for discharge. Although crush margins are firm, it’s unlikely any new business will be done until such issues are resolved.

In Europe farmer selling remains slow. Old-crop crush coverage is ample with some crushers claiming to be fully covered. Exports are still available to the UK at levels equating to, or cheaper than, domestic seed.

European rapeseed futures continue to trade in a narrow range and the increasing EU old crop carry-out may weigh on prices in time. But, as concerns mount over new crop conditions in Europe, it’s likely to be rangebound.

In the UK, ex-farm prices are trading close to last week’s levels, influenced by the direction of sterling rather than market fundamentals.