Wheat market

The US market is unchanged on the week. Support remains intact, due to declining production prospects in Australia and the expected impact of adverse weather in Argentina and Brazil.

On the negative side, US exports continue their sluggish tone, with exports running 21% behind last year and well below USDA’s forecast of a 14% yearly increase.

European prices are about €1/t higher on the week, but off the weekly highs due to a firmer euro/dollar rate.

As in the US, exports continue to drag compared with last year. Exports to non-EU destinations are reported at 5.9mln t, down 24% on the year.

Farm bureau France AgriMer slightly reduced French intra-EU wheat exports by 100,000t yesterday, increasing 2018-19 ending stocks by a similar level. Soft wheat exports beyond the EU were left unchanged at 8.75mln t, of which 2.89mln t had been shipped as of Monday.

With key importers seemingly covered into the New Year, the emergence of new crop Argentine wheat threatens this target, as the current pricing structure undercuts French supplies into Algeria.

In the UK, prices are currently trading up £2.50/t on the week. At present it’s all about Brexit and the turmoil in Westminster as the draft agreement is released, with implications not just for tariff-free access to the EU but also for the value of sterling.

Brexit aside, market dynamics continue to portray a bearish fundamental scenario. Wheat imports for the first quarter (July-Sept) were reported at over 758,000t, compared with exports at only 79,000t for the same period.

EU imports exceed 607,600t, already almost half of the 2017-18 total, while non-EU imports are running in line year on year. This is making the UK balance sheet heavy, increasing the need for export competitiveness, especially given the expected fall in domestic requirements due to the closure of the country’s bioethanol plants.

David Sheppard, Gleadell’s managing director commented:

Uncertainty over southern hemisphere production has increased, although US and EU exports remain sluggish. The long-term outlook still points to a slow-down, or stop in Russian exports, and the possible export shift into the EU, US or both.

However, until there are signs of this actually happening, it will limit buyers’ hunger to move to a longer position, thus keeping market rallies limited.

Meanwhile in the UK it’s all about Brexit and government and currency implications, which in the end will impact upon farm levels.

OSR market

The soybean market continues to speculate whether the trade meetings between the US and China will result in a softening in the levy situation on US beans, but so far it looks unlikely.

It would appear that China is continuing to find enough material from South America and increasingly Canada to maintain supplies and, even with the 25% duty, US soybeans may well calculate.

One thing is clear, there are enough soybeans in the world, the problem is that trade politics has put them in the wrong place!

The rapeseed market is largely unchanged on the week. The market had found some support on the back of crusher buying, but the firming euro and the on-going issues with logistics and low water in central mainland Europe continue to raise questions about demand.

However, the focus for the UK market continues to be the Brexit draft agreement and the money markets’ perception of the effect on the UK economy.