Wheat Market

Wheat has largely escaped the recent wild price action triggered by the escalating US/China trade dispute.

Soy and corn markets were all over the place this week, with manic Monday following bullish US soy and corn planting numbers released last Thursday night, then turn-around Tuesday followed by wacky Wednesday, as China imposed a 25% import tariff on US soybeans, corn and other agricultural products.

Market confusion was rife as fund longs headed for the exit, before some signs of stability were reintroduced.

However, US wheat has held itself together, firming $4/t on the week. Support continues to come from dryness concerns in the US plains.

This was emphasised by initial crop ratings for the winter wheat crop of only 32% good/excellent, the third lowest in 30 years, although higher-than-expected spring plantings were deemed bearish.

Paris wheat firmed €3.50/t on the week. Algeria purchased another 330,000t for June shipment, which is likely to be of French origin, although this will do little to alter the overall export picture, with non-EU soft wheat exports reported still down 23% year on year.

Russian wheat exports for the season through 4 April were reported at 31.2mln t, up 41% year on year, with exports of all grains seen at 40mln t, up 39% year on year.

London wheat is trading up about £1.50/t on the week, with currency virtually unchanged. Market dynamics also remain little changed, with good spot demand mainly from merchant shorts underpinning the market.

Further ahead, buyers seem a bit less enthusiastic with their pricing, with signs of increased offers of wheat, albeit at market carries.

Gleadell comment

In summary, you can trade technical and you can trade fundamental markets, but this week goes to show what political intervention can do.

The US/China trade dispute will have more of an impact upon soy and corn markets, although wheat may get caught in the crossfire.

Outside this, the market will concentrate on South American/US weather and export demand, plus late spring sowings across much of the northern hemisphere, especially in the UK, which in turn may affect final 2018 yields and production numbers.

OSR Market

The US/China trade tariff issue created a lot of news and a lot of price volatility in the US CBOT soybean market, but at the time of writing it is trading within 5c/bu of where the market started before last week’s USDA report.

In Europe the rapeseed market has largely ignored the wild price movements seen in CBOT soybeans, viewing it as a domestic US issue.

Matif rapeseed futures ticked higher and, when we cut through the political fog, the fundamentals still need the US to deliver its soy crop.

There is a lot of weather and risk to get through before US crops are in the barn and the EU rapeseed crop is also suffering in this wet, slow start to the spring.

Chicago initially reacted badly to the news that, after lots of sabre rattling, the Chinese retaliated to the US measures with a series of proposed tariffs, including a 25% import duty on US soybeans.

Nearly 4% was wiped off the value of CBOT soybeans in the hours immediately following the announcement, but they recovered to finish with comparatively moderate losses.

It is not entirely clear what this means for the global oilseeds market yet. In the short to medium term, the Chinese will still need the 30-35mln of imported soybeans that had been coming from the US.

The Argentine situation is getting worse not better, and that country’s final crop figure could well be below 35mln t, down from 56mln t last year.

Whilst Brazil should have another near record production, logistics simply won’t cope with that volume of additional demand, without relinquishing other traditional commitments.

What it could mean is a change in trade flows. Brazil could pick up the Chinese demand and price itself out of its current traditional markets, and the US will have to price itself at a level to find demand into the rest of the world.

China’s 25% tariff is clearly designed to hurt the Trump-supporting US Midwest farmer and create some negotiation leverage. The USDA report last week showed a swing towards soybeans at the expense of corn, but the market expected a much greater move.

More importantly, the report illustrated a move to fallow as US farmers react to their worst farm incomes for 10 years.