Jonathan Lane comments on the wheat market

Over the past week the US market has continued to trade lower, down about $7/t, as continued improvement of new crop prospects helps to ease market pressures.

Last Friday saw the latest release of USDA’s global supply and demand figures. The June report typically contains gentle amendments at best, and this was no exception.

World wheat production was trimmed by 1.4 mln t to 773.43 mln t. Despite trade expectations of reduced US production, USDA’s increase to US yields saw a modest rise of 47.26 mln t.

Russian wheat production was nudged up just 1 mln t to 81 mln t, still some way short of private analysts who are circling the 85-87 mln t figure (SovEcon leads the way at 88.6 mln t). Export predictions are around 42 mln t.

USDA expects Ukraine’s new crop corn output to rise by 4 mln t compared with last month’s figure. The increase was the main contributor to the surprise jump in global corn ending stocks that are now posted at 310.45 mln t.

EU prices have not followed the US markets though, with new crop MATIF (Dec) and London (Nov) futures up €6/t and £7.50/t respectively over the period.

Talk continues of export corridors from Ukraine into the global market. However, progress is still slow and questions remain, with Turkey’s President Erdogan speaking to the Ukrainians this week.

Ukraine’s deputy agriculture minister estimated the 2022 grain harvest to be around 48.5 mln t compared with last year’s 86 mln t. The total area sown for the 2022 campaign is estimated to be down about 25% following Russia’s invasion. We talked to one former Ukrainian farm manager last week who was concerned that fires ignited by the fighting could threaten crops.

France’s wheat crop continues to prove worrisome as temperatures continue to soar, with crop ratings sliding.

FranceAgriMer reduced its estimates of French non-EU soft exports by 150,000t to 9.1 mln t for 2021/22. Soft wheat ending stocks remained unchanged at 3.2 mln t.

The UK crop continues to look broadly good, as the recent showers/sunshine cycle has helped boost yield potential. Harvest start-date predictions vary nationally, with some talking of wheat being as much as 10 days ahead in some areas, although most expectations seem to be at the early end of normal.

Will Ringrose comments on the OSR market

At the end of last week USDA’s report reduced US soybean ending stocks below trade expectations. But world ending stocks for 2021/22 soybeans were reported higher than trade estimates at 86.15 mln t (average estimate: 84.82 mln t), and 2022/23 ending stocks were reported at 100.46 mln t against estimates at 99.77 mln t.

Soybean prices traded off highs this week, dipping below $17. Informa estimates the US bean area at 88.7 mln acres compared with USDA’s 90.9 mln acres, with some farmers still to finish. US weather still shows hot and dry weather for the next few weeks, which may pressure crop conditions, although crop ratings earlier this week were reported at 70% good/excellent, in line with estimates.

In China, it was reported that traders cancelled 100,000mt of US purchases and switched to Brazilian supplies. There are still concerns over some areas going back into lockdown which may knock product demand.

USDA estimates Brazil’s soybean crop at 126 mln t vs 139.5 mln t last week. Argentina’s soybean production was estimated at 43.4 mln t vs 46.2 mln t last year.

Brazilian farmers are nearly fully sold and clearing out the bins ready for corn harvest.  In Argentina, farmer selling has risen, but remains behind last year. It was rumoured that both Argentina and Brazil will increase their biofuel mandates in the not-too-distant future, which will send support to veg oil prices.

Crude oil prices fell off recent highs, with West Texas Intermediate trading $3 down in yesterday’s session, $7 off recent highs.

Veg oil prices are still in a downward trend, pressured at the start of the week with Indonesia speeding up the export pace of palm oil in addition to lowering export taxes. Parts of China are going back into lockdown and energy prices were pressured, which had a knock on-effect into veg oils.

Canadian canola and MATIF rapeseed tried to bounce from the sell-off at the start of the week, but struggled to break nearby resistance levels without anything new to trade on.

For the UK, sterling was the big story, as it fell to lows against the euro and dollar not seen since the start of 2021. Investors seem to have lost confidence in the UK economy, with inflation rising and the Bank of England struggling to control it. However, levels have partly recovered.